Choice "C" is correct. An increase in the cost of carrying inventory would lead to a reduction in average inventory. Suppose item A is required to be refrigerated so that it will not spoil. If electricity prices are rising, management would prefer to have a lower inventory of item A on hand because of the electricity (i.e., carrying) cost of that item.
Choice "d" is incorrect. An increase in the cost of placing an order would lead to an increase in average inventory. Management would increase the amount of inventory per order to reduce the number of orders, thereby causing the company to on average hold more inventory.
Choice "a" is incorrect. Increased demand would likely increase average inventory to avoid stockout costs.
Choice "b" is incorrect. An increase in lead-time would likely lead to an increase in average inventory. A higher safety stock likely would be needed to accommodate the lead-time to ensure that requirements are met.