The Objective of a Transfer Pricing System Should Be

question 14

Multiple Choice

The objective of a transfer pricing system should be

• A) to maximize the transfer price
• B) to minimize the transfer price
• C) to maintain goal congruence between the divisions and the entire firm
• D) none of the above

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Definitions:

Negative Externality

An economic activity that imposes a negative effect on an unrelated third party, often leading to market failure if not addressed, like pollution.

Mosquitoes

Mosquitoes are flying insects known for their role in spreading diseases to humans and other animals through their bites.

Ornamental Pond

a water feature designed for aesthetic purposes, often found in gardens or landscapes.

Social Cost

The total cost to society, including both private costs borne by individuals and external costs borne by others not involved in a transaction.