To determine the optimal quantity to hold in inventory, a profit- maximizing manager uses marginal analysis.

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Marginal analysis helps a manager to determine the optimal quantity to hold in inventory for maximizing profits. It involves evaluating the additional profit generated by producing or selling one more unit of a product and comparing it to the additional cost incurred in doing so. The point where the marginal cost equals the marginal revenue is the optimal quantity to produce or sell.

To Determine the Optimal Quantity to Hold in Inventory, a Profit-