The expected marginal benefit falls as the quantity held in inventory increases.

Name: The expected marginal benefit falls as the quantity held in inventory increases.
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Question

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As inventory quantity increases, the marginal benefit of holding additional units of inventory decreases because the costs of storage, maintenance, and obsolescence increase while the potential revenue or savings decrease. Eventually, holding more inventory becomes unprofitable.

The Expected Marginal Benefit Falls as the Quantity Held in Inventory