A change that increases the expected profit from holding a unit of product in inventory, ________ the expected marginal revenue curve and the _______profit-maximizing quantity to hold in inventory.

Question

Quizplus · Accepted Answer

When the expected profit from holding a unit of product in inventory increases, it means that the marginal revenue from selling that unit of product has also increased. This causes the expected marginal revenue curve to shift upwards. As a result, the profit-maximizing quantity to hold in inventory also increases since the higher expected profit incentivizes holding more inventory.

A Change That Increases the Expected Profit from Holding a Unit