Curious what happens when inventory for a product reaches 0. Does the channel entry automatically change its status to 'closed' so it doesn't appear as an option? Does it stay visible but cannot be added to the cart? Is there some error messaging associated with it? Also, if it's possible to set it manually, is it a system-wide setting or per-product basis? Any guidance is much appreciated!

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The product will still show up in your templates, but the customer won’t be able to add them to their cart. The status will not change. As per the Product Tag docs you could do something like the following in your template…

{if total_stock} In Stock {if:else} Out of Stock {/if}

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