The inventories as a factor of production motive for holding inventories suggests that:
A)firms hold inventories in order to produce more output.
B)when sales are low, firms produce more than they sell and put the extra goods in inventories.
C)firms hold inventories to avoid losing sales.
D)when a product is only partly completed, its components are counted as part of the firm's inventory.

Question

Quizplus · Accepted Answer

The inventories as a factor of production motive for holding inventories suggests that firms hold inventories in order to produce more output. This is because holding inventories allows firms to have the necessary inputs on hand to continue production without interruption, even if there are disruptions in their supply chain. By holding inventories, firms can keep their production lines running and meet customer demand, which ultimately helps to increase their output.

The Inventories as a Factor of Production Motive for Holding