1. The Economic Order Quantity (EOQ) model is designed to find the optimal order quantity that minimizes the total inventory costs. 2. These total costs include two main components: order costs (or setup costs) and holding costs (or financial opportunity costs). 3. The EOQ formula is given by: $$EOQ = \sqrt{\frac{2DS}{H}}$$ where: - $D$ is the demand rate (units per period), - $S$ is the order cost per order, - $H$ is the holding cost per unit per period. 4. The EOQ balances the tradeoff because ordering more frequently reduces holding costs but increases order costs, while ordering less frequently increases holding costs but reduces order costs. 5. Therefore, the EOQ equation perfectly balances these two opposing costs to minimize total inventory cost. Final answer: True