When There Is an Outside Market for an Intermediate Product

question 26

Multiple Choice

When there is an outside market for an intermediate product that is perfectly competitive,what is the most equitable method of transfer pricing?

• A)market price
• B)production cost pricing
• C)variable cost pricing
• D)cost plus markup pricing

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Definitions:

Quotas

Predetermined limits set on the quantity of goods that can be produced, imported, or exported.

Market Outcomes

The results of all the buying and selling activities in a particular market.

Price Floor

A government-imposed minimum price for a good or service, aimed at preventing prices from falling too low.

Government Surplus

The situation where government revenues exceed its expenditures during a specific period.