Figure 7-5 
Figure 7-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7-5.If the market price is $20,what is the firm's profit-maximising output?
Definitions:
Total Costs
The sum of all expenses incurred in the production of goods or services, including direct and indirect costs, both variable and fixed.
Step-Down Method
A method of allocating costs whereby one service department’s cost is allocated to all remaining service departments and operating departments, and so on, until all service department costs are allocated to final products.
Death Spiral
A situation occurring when transfer prices include fixed costs and users reduce their use of the internal product or service. This further increases the transfer price (based on average cost) and more users reduce their demand.
Internal Pricing System
A method used by companies to assign a price to goods or services exchanged between the different divisions of the same company.
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