The correct answer is: A. Falling.
The LIFO method (Last In, First Out) is a method of accounting for inventory that assumes that the items that were purchased last are sold first. This means that the cost of goods sold is based on the most recent prices paid for inventory. When prices are falling, the LIFO method will result in a lower cost of goods sold and a higher net income.
The FIFO method (First In, First Out) is a method of accounting for inventory that assumes that the items that were purchased first are sold first. This means that the cost of goods sold is based on the oldest prices paid for inventory. When prices are rising, the FIFO method will result in a higher cost of goods sold and a lower net income.
The average cost method is a method of accounting for inventory that assumes that the cost of goods sold is based on the average cost of all the inventory on hand. This method is not affected by changes in prices.
The specific identification method is a method of accounting for inventory that assumes that the cost of each item of inventory is specifically identified. This method is the most accurate method of accounting for inventory, but it is also the most time-consuming and expensive.
In conclusion, the LIFO method is suitable when prices are falling because it will result in a lower cost of goods sold and a higher net income.