1. The problem asks to complete the phrase: "Inventory should be measured at the lower of cost and _____". 2. This is a fundamental accounting principle related to inventory valuation. 3. The correct term to complete the phrase is "net realizable value". 4. Net realizable value (NRV) is the estimated selling price in the ordinary course of business minus any costs of completion, disposal, and transportation. 5. The rule ensures that inventory is not overstated on the balance sheet. 6. Therefore, inventory is reported at the lower of its historical cost or its net realizable value. Final answer: net realizable value.