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Which of the following is NOT part of the business cycle?
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1. Introduction to Microeconomics
Introduction to Economics
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If the company sells every unit it produces, which of the following statements is true about its inventory levels?
A
The company's inventory remains unchanged.
B
The company's inventory is zero.
C
The company's inventory decreases.
D
The company's inventory increases.
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Understand the relationship between production, sales, and inventory. Inventory changes when the quantity produced differs from the quantity sold.
Since the problem states the company sells every unit it produces, this means the quantity sold equals the quantity produced.
Recall the inventory change formula: \(\text{Change in Inventory} = \text{Production} - \text{Sales}\).
Substitute the given condition into the formula: \(\text{Change in Inventory} = \text{Production} - \text{Production} = 0\).
Conclude that if the company sells all units it produces, the inventory does not increase or decrease, so the inventory level remains zero.
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