Suppose Your Manufacturing Firm Is Not a Price-Taking Seller (I

question 116

Multiple Choice

Suppose your manufacturing firm is not a price-taking seller (i.e., has some control over your product price) and sells machinery to U.S. (domestic) buyers as well as foreign buyers. The domestic demand for your product is inelastic but the foreign demand is elastic, and the machinery is bulky so that the high transport costs prevent resale among the buyers. You could charge both groups of buyers the same price for the machinery, but you know that you could increase total sales revenue by charging the domestic buyers a ________ price and charging the foreign customers a ________ price.

• A) higher, higher
• B) higher, lower
• C) lower, higher
• D) lower, lower

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Expected Benefit Approach

A method used in actuarial science and finance to calculate the anticipated benefits and corresponding costs or contributions to a pension plan over time.

Output Market

The marketplace in which goods and services produced by businesses are sold or offered to end users or consumers.

U.S.GAAP

United States Generally Accepted Accounting Principles, a standard framework of accounting rules for financial reporting.