The Basic Incentive Problem Associated with Internal Transfers Is

question 29

Multiple Choice

The basic incentive problem associated with internal transfers is:

• A) divisional managers have private information about opportunity costs.
• B) divisional managers have only public information about opportunity costs.
• C) senior management have private information about opportunity costs.
• D) senior management must make all information about opportunity costs public.

---

Definitions:

Linear Relationship

A type of correlation where there is a constant change rate between two variables, indicative of a straight line when graphed.

Confidence Interval Estimate

A range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter.

Prediction Interval

A prediction of the range within which future data points are likely to land, based on past observations, along with a specified level of confidence.

T-Table Values

Critical values used in T-tests that determine the threshold for rejecting the null hypothesis, based on degrees of freedom and desired significance level.