Command and Control Methods Do Not Always Produce the Most

question 230

Multiple Choice

Command and control methods do not always produce the most efficient outcomes because:

• A) consumers sometimes are mislead regarding their own preferences.
• B) they lack the flexibility to allow buyers and sellers to choose the least costly methods to alter their behavior.
• C) it does not always allow suppliers to produce the efficient market quantity.
• D) it reduces consumption in all cases.

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Definitions:

Profitability

The ability of a business to earn a profit, which is the balance of revenue after accounting for all expenses, taxes, and costs.

Negotiated Price Approach

An approach to transfer pricing that allows managers of decentralized units to agree (negotiate) among themselves as to the transfer price.

Transfer Price

The price at which divisions of a company transact with each other, such as the sale of goods or services, often used for budgeting and tax purposes.

Decentralization

The process of distributing or dispersing functions, powers, people, or things away from a central location or authority.