In a Time of Distress Prices, Which of the Following

question 107

Multiple Choice

In a time of distress prices, which of the following is true?

• A) The vendor division should set the transfer price at the distress price on a long-term basis for stability within the overall company.
• B) The vendor division should cease production.
• C) The purchasing division should pay normal prices.
• D) In the short-term, the transfer price should be the distress price as long as this exceeds the incremental costs.
• E) The distress price should be ignored as it is a function of the market, not of the internal capacities of the overall company.

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Definitions:

Air Pollution

The presence of substances in the atmosphere that are harmful to human health, the environment or cause climate change.

Public Good

Goods that are non-excludable and non-rivalrous, meaning they can be used by many without diminishing the supply.

Clean Air

The state of the atmosphere when it is free from pollutants and substances harmful to living organisms and the environment.

Imperfect Information

A situation where all parties in a transaction do not have equal access to all relevant information.