Halifax & Smyth (H&S) Is a Clothier That Specializes in Expensive

question 104

Multiple Choice

Halifax & Smyth (H&S) is a clothier that specializes in expensive men's suits, and the firm makes the suits from wool fabrics that are woven by one of the firm's divisions. This division is not the only source for this material, and H&S could buy or sell wool fabric in the outside competitive market. H&S will buy some of the wool fabric that it needs for suits from the outside market if the:

• A) market price is less than the optimal transfer price if the outside market did not exist.
• B) market price is less than the point where the net marginal revenue of weaving wool fabric intersects the marginal cost of wool fabric.
• C) market price is less than the point where the net marginal revenue of assembling men's suits intersects the marginal cost of assembly.
• D) Both A and B are correct.

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Definitions:

Cross Elasticity

A measure of the responsiveness of demand for one product in relation to a price change in another, highlighting substitute or complementary relationships between products.

Demand

The desire to own anything, coupled with the power to obtain it.

Price Increase

A rise in the cost of goods and services, which can be caused by factors such as inflation, increased production costs, or higher demand.

Demand Curves

Graphs displaying the relationship between the price of a good and the quantity demanded by consumers, typically downward sloping.