A firm run by a rational entrepreneur would want to hold inventories.

Question

Quizplus · Accepted Answer

A rational entrepreneur would want to hold inventories in order to avoid stock-outs and ensure that they can fulfill customer orders in a timely manner. Holding inventories also allows the firm to take advantage of economies of scale in production and purchasing, and to hedge against price fluctuations in inputs or finished goods. However, there is a cost associated with holding inventories, which includes storage, handling, and risk of obsolescence or deterioration. Therefore, the optimal level of inventory would depend on various factors such as demand variability, lead times, production capacity, and market conditions.

A Firm Run by a Rational Entrepreneur Would Want to Hold