Multiple Choice
Which of the following instances does NOT exemplify a situation where a late-mover advantage arises in competitive markets?
76
views
3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following is NOT considered a pressure to hold large inventories in competitive markets?
A
To minimize holding costs and increase cash flow
B
To take advantage of quantity discounts from suppliers
C
To reduce the risk of production stoppages due to supply delays
D
To avoid stockouts and meet unexpected demand
Verified step by step guidance1
Step 1: Understand the concept of inventory holding pressures in competitive markets. These pressures are factors that motivate firms to keep larger inventories to ensure smooth operations and cost advantages.
Step 2: Identify common reasons for holding large inventories: (a) to take advantage of quantity discounts from suppliers, (b) to reduce the risk of production stoppages due to supply delays, and (c) to avoid stockouts and meet unexpected demand.
Step 3: Recognize that holding large inventories typically increases holding costs, such as storage, insurance, and capital costs, which firms generally want to minimize rather than maximize.
Step 4: Analyze the option 'To minimize holding costs and increase cash flow'—this is actually a pressure to hold smaller inventories, not larger ones, because minimizing holding costs means reducing inventory size.
Step 5: Conclude that the option 'To minimize holding costs and increase cash flow' is NOT a pressure to hold large inventories, unlike the other options which are valid reasons to maintain larger stock levels.
Related Videos
Related Practice
