Multiple Choice
Which of the following is a characteristic of the economic model used to explain the Dutch disease?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following types of recurring problems tend to get masked by buffer inventory?
A
Positive externalities from public goods
B
Increased consumer demand for a product
C
Production inefficiencies such as machine breakdowns or poor scheduling
D
Government-imposed price floors
Verified step by step guidance1
Understand what buffer inventory means: Buffer inventory refers to extra stock kept to protect against uncertainties in supply or production delays.
Identify the nature of each option: Positive externalities and government-imposed price floors are economic concepts related to market effects and regulations, not directly related to inventory management.
Consider increased consumer demand: While buffer inventory can help meet unexpected demand, it does not mask problems caused by demand itself; it only helps smooth supply.
Focus on production inefficiencies: Problems like machine breakdowns or poor scheduling cause disruptions in production flow, which buffer inventory can hide by providing extra stock to fulfill orders despite these inefficiencies.
Conclude that buffer inventory primarily masks production inefficiencies by absorbing the impact of delays or breakdowns, allowing operations to continue smoothly from the customer's perspective.
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