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Kara’s Kittens typically produces and sells at its optimal (lowest per-unit cost) level of 30 scratching posts per week. Kara’s also maintains an inventory of 20 scratching posts. If prices are sticky and there is a positive demand shock this week resulting in demand for 40 scratching posts, we would expect Kara’s to:

answer:

sell the additional scratching posts out of its inventory and rebuild the inventory later when a negative demand shock occurs.

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