When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market
a. It is appropriate to ignore that the market price includes a margin above marginal cost
b. It is OK if the product on the market includes costly features your downstream division does not use
c. Consider whether the product on the market is inexpensive because its quality is lower than you use
d. If it is similar enough, it is justification for you producing it in-house
b
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Explain how a model can be useful even if it is not realistic
What will be an ideal response?
Fast Prints has a contract with local couriers to deliver their products to customers located throughout the city and it cost Fast Prints $5,000 in legal fees to establish the contracts. Fast Prints charges $25 for each set of 500 copies delivered in the city. What are Fast Prints' transaction costs?
A) $5,025 B) $4,975 C) $25 D) $5,000
Goodspeed Automobiles manufactures 100 disc brake cylinders. At this output level, its marginal revenue is equal to its marginal cost. If the revenue per unit of output is $500 and the per unit cost is $350, its profit is:
a. $20,000. b. $15,000. c. $45,000. d. $25,000. e. $10,000.
A tariff is better than a quota because
a. it does not distort trade as much. b. quotas are inflexible. c. tariffs produce tax revenue. d. quotas hurt domestic producers; tariffs hurt foreign producers.