Microsoft Hires Marketing and Sales Specialists to Decide What Prices

question 22

Multiple Choice

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy wheat farmer in Saskatchewan, who sells his output in the world commodity market, does not.Why is this so?

• A)because Microsoft is large enough to hire the best people in the field
• B)because Microsoft could potentially lose sales if it sets prices indiscriminately
• C)because the wealthy wheat farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects
• D)because unlike Microsoft, the wealthy wheat farmer is probably a monopolist

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Definitions:

Historical Cost

The original monetary value of an asset or transaction, used as a basis for accounting and not adjusted for inflation.

Retained Earnings

The portion of net income not distributed as dividends but retained by the company to be reinvested in its core business or to pay debt.

Current Market Value

The amount of money for which an asset can be sold in the marketplace at the current time, reflecting the most recent transaction price possible.

Historical Cost

The original monetary value of an asset, based on the purchase price or investment cost at the time of acquisition, without adjustments for inflation or market value changes.