Desired Level of the Capital Stock
-Consider the two graphs above.Suppose rising fuel costs makes it more expensive to move goods to and from warehouses.This would ________ the desired level of inventories,as depicted in graph ________.
A)increase;B
B)increase;A
C)decrease;B
D)decrease;A

Question

Desired Level of the Capital Stock 
-Consider the two graphs above.Suppose rising fuel costs makes it more expensive to move goods to and from warehouses.This would ________ the desired level of inventories,as depicted in graph ________.
A)increase;B 
B)increase;A 
C)decrease;B 
D)decrease;A

Quizplus · Accepted Answer

Rising fuel costs would make it more expensive to move goods to and from warehouses, which would increase the costs of holding inventories. As a result, firms would want to reduce their inventory levels, causing a decrease in the desired level of inventories depicted in graph B.