Discussion
The Economic Order Quantity (EOQ), primarily :
Answer: C
The EOQ primarily balances carrying and ordering costs.
Total annual cost in the basic model is \(\dfrac{D}{Q}C_{o} + \dfrac{Q}{2}C_{h}\): ordering cost falls as the order size Q grows, while carrying cost rises. The EOQ \(Q^{*} = \sqrt{2DC_{o}/C_{h}}\) minimises the total, and at \(Q^{*}\) the two costs are exactly equal.
It does not minimise set-up (ordering) cost alone, which would mean ordering as rarely as possible, and the basic EOQ model assumes no shortages, so it is not designed to reduce them. Hence 'all of the above' is wrong too.
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