A change that decreases 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

If the expected profit decreases from holding a unit of product in inventory, it means the cost of holding that unit (such as storage, maintenance, etc.) has increased or the demand has decreased. This results in a decrease in the expected marginal revenue curve, as the revenue generated from selling that unit is now lower. Therefore, the profit-maximizing quantity to hold in inventory will also decrease.

A Change That Decreases the Expected Profit from Holding a Unit