The optimal level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is greater than the gain (in interest revenue and decreased storage costs).

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The optimal level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is equal to the gain (in interest revenue and decreased storage costs), not greater.

The Optimal Level of Inventories Is the Level at Which