Four Reasons for Firms to Hold Inventories Are Given in the Text.For

question 49

Essay

Four reasons for firms to hold inventories are given in the text.For each reason,indicate briefly whether and how it helps to explain the high volatility of inventory investment.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor costs.

Japanese Firms

Companies based in Japan, often characterized by unique business practices such as lifetime employment and strong government-industry cooperation.

Marginal Revenue

The additional income generated from selling one more unit of a product or service.

Marginal Costs

The supplementary expense incurred from making one more unit of a product or service.