SOLVED

1) The most volatile component of total investment spending is ________. A) construction spending by firms. B) spending by firms on equipment. C) residential construction by households. D) inventory adjustment. 2) The order of inventories for production as they are needed is known as ________. A) just-in-time production. B) production smoothing. C) work in process D) stock out avoidance. 3) Retail stores that dedicate one or more aisles to “seasonal” items are engaging in ________. A) just-in-time production. B) production smoothing. C) work in process D) first degree price discrimination 4) Holdings of partially finished components involve inventories of ________. A) Tobin’s q. B) work in process. C) production smoothing. D) stock-out components 5) A car dealer that maintains a large number of automobiles on their lot so that they avoid losing a sale to another dealer who has the make and model a given customer wants is engaged in ________. A) production smoothing. B) work in process. C) stock-out avoidance. D) first degree price discrimination. 6) Firms that continue to produce when sales are temporarily low in an effort to avoid costly fluctuations in production are engaging in ________. A) second degree price discrimination. B) stock out avoidance. C) work in progress. D) production smoothing. 7) One explanation for the sharp decline in inventory adjustment during the 2007-2009 financial crisis was ________. A) financing constraints. B) the rise in the level of income. C) the volatility of interest rates. D) the increase in total spending and therefore costs. 8) Consider the two graphs above. Suppose that firms are able to use inventories as collateral for low-interest loans. This would ________ the desired level of inventories, as depicted in graph ________. A) increase; B B) increase; A C) decrease; B D) decrease; A 9) Consider the two graphs above. Suppose that improvements in storage technology reduce inventory losses. This would ________ the desired level of inventories, as depicted in graph ________. A) increase; B B) increase; A C) decrease; B D) decrease; A 10) Consider the two graphs above. Suppose producers forecast a decrease in sales. This would ________ the desired level of inventories, as depicted in graph ________. A) increase; B B) increase; A C) decrease; B D) decrease; A