North Division Sells a Part Internally to South Division

question 101

Multiple Choice

North Division sells a part internally to South Division.South Division uses the part to produce inexpensive products sold at discount stores.North Division incurs costs of $1.50 per part,while South Division incurs additional costs of $4.80 per product.North Division sells the part to South Division for $2.00 per part.The final product is sold to external customers for $8.00 each.Which of the following formulas correctly reflects the company's operating income?

• A) $8.00 - $1.50 - $4.80 - $2.00 = $(0.30)
• B) $8.00 - $1.50 - $4.80 = $1.70
• C) $8.00 - $4.80 -$2.00 = $1.20
• D) $8.00 - $1.50 = $6.50

Determine consumer preferences and reservation prices for goods.

Understand the concept of marginal revenue and how it relates to price.

Evaluate the impact of income changes on the demand for goods.

Understand the concept of complementary and substitute goods in consumer preferences.

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Definitions:

Water-Diamond Paradox

A paradox that questions why diamonds are expensive and water is cheap when water is essential for survival and diamonds are not.

Utility Theory

An economic theory that models how individuals make choices based on their preferences and the perceived utility or satisfaction from goods and services.

Marginal Utility

The additional satisfaction or benefit gained from consuming one more unit of a good or service.

Trading Cards

Collectible cards typically featuring individuals from sports, television, or other areas of popular culture, often traded and valued by enthusiasts.