Multiple Choice
Which of the following occurs only in the long run with respect to the Production Possibilities Frontier (PPF)?
37
views
2. Introductory Economic Models
Production Possibilities Frontier (PPF) - Introduction and Productive Efficiency
Struggling with Microeconomics?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is an assumption in the Economic Production Quantity (EPQ) model?
A
Production and demand rates are constant and known.
B
Shortages are allowed during the production cycle.
C
Inventory is replenished instantaneously.
D
Production rate is always less than the demand rate.
Verified step by step guidance1
Understand the Economic Production Quantity (EPQ) model: It is an inventory management model that determines the optimal production quantity to minimize total costs, considering both production and holding costs.
Recall the key assumptions of the EPQ model: One major assumption is that both the production rate and demand rate are constant and known, which allows for a steady and predictable inventory build-up and depletion.
Analyze the given options in light of EPQ assumptions: For example, shortages are typically not allowed during the production cycle in the basic EPQ model, so that option is incorrect.
Consider the inventory replenishment process: In EPQ, inventory is replenished gradually during production, not instantaneously, which differentiates it from the Economic Order Quantity (EOQ) model.
Evaluate the relationship between production and demand rates: The production rate in EPQ is assumed to be greater than the demand rate to allow inventory to build up during production periods.
Related Videos
Related Practice
Production Possibilities Frontier (PPF) - Introduction and Productive Efficiency practice set
Problem sets built by lead tutorsExpert video explanations