A Product Whose EOQ Is 40 Units Experiences a Decrease

question 138

Multiple Choice

A product whose EOQ is 40 units experiences a decrease in ordering cost from $90 per order to $10 per order.The revised EOQ is:

• A)three times as large.
• B)one-third as large.
• C)nine times as large.
• D)one-ninth as large.
• E)cannot be determined

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.

Income Effect

The change in consumers' purchasing power and consequently the quantity demanded of a good or service, prompted by a change in real income.

Opportunity Cost

Missing the chance to profit from several alternative options by deciding on one.

Hourly Wage Rate

The amount of money paid for each hour of work, commonly used to compensate employees in many occupations.