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Optimal Quantity of Widgets

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November 15th, 2022

A firm sells 25,000 widgets annually that it purchases from a widget supplier for
$10 each. It costs the firm $62.50 in administrative costs to place an order for the
widgets and, on the average, costs $0.50 in carrying costs to maintain a widget in
inventory. What is the optimal quantity of widgets to be purchased in each order
from the widget supplier?

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