The Transfer Price of an Upstream Product Should Always Equal

question 14

Multiple Choice

The transfer price of an upstream product should always equal the market price when:

• A) there is an outside market for the upstream product.
• B) the price elasticity of demand for the upstream product is greater than 1 (in absolute value).
• C) there is a perfectly competitive market for the downstream product.
• D) the marginal cost of the downstream product is greater than 1.
• E) the firm is a monopolist in its downstream market.

---

Definitions:

Workers' Wages

The compensation or earnings paid to employees or laborers for their work or services, usually expressed in terms of hourly, daily, or monthly rates.

Reconstruction Finance Corporation

A government corporation in the United States created by Congress in 1932 to provide financial support to state and local governments and make loans to banks, railroads, mortgage associations, and other businesses.

Federal Loans

Long-term borrowing provided by the federal government to support students, businesses, and other entities, often with favorable terms.

Insurance Companies

Organizations that provide financial protection against specified risks in exchange for premiums.