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 paying wages to labor.
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 suggests that firms hold inventories in order to produce more output. This is because holding inventories allows firms to maintain a continuous production process and avoid interruptions in the event of supply chain disruptions or unpredictable variations in demand.

The Inventories as a Factor of Production Motive for Holding