The stock-out avoidance 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 losing sales.
D) when a product is only partly completed, its components are counted as part of the firm's inventory.

Question

Quizplus · Accepted Answer

The stock-out avoidance motive for holding inventories suggests that firms hold inventories to avoid losing sales. This means that firms want to ensure that they have enough inventory on hand to meet customer demand and fulfill orders, rather than running out of stock and potentially losing sales to competitors.

The Stock-Out Avoidance Motive for Holding Inventories Suggests That