Holmstrom and Tirole Note "The Economist's First Instinct Is to Set

question 13

Multiple Choice

Holmstrom and Tirole note "The economist's first instinct is to set transfer price equal to marginal cost." However,a distinct plurality of companies uses the full-cost method.That is because:

• A)most companies do not employ economists.
• B)it is simple and has a low cost of implementation.
• C)it is identical to using a marginal cost approach to transfer prices.
• D)the results are much better in the field with full-cost method.

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Definitions:

Integrated Marketing Communications

A strategic approach that combines various forms of communication and marketing channels to provide a clear, consistent, and compelling message about an organization and its products.

Promotional Strategy

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