All else equal, a ﬁrm that holds safety stocks of inventory will have a lower level of average
inventory than a ﬁrm that does not.

Question

Quizplus · Accepted Answer

Holding safety stocks of inventory means keeping extra inventory as a buffer to account for unexpected demand or supply chain disruptions. This would result in a higher level of average inventory, not a lower level. Therefore, the statement is false.

All Else Equal, a ﬁRm That Holds Safety Stocks of Inventory