The Red River Division of Alto Company Produces and Sells

question 25

Multiple Choice

The Red River Division of Alto Company produces and sells bags of pottery clay that can either be sold to outside customers or transferred to the White Mountain Division of Alto Company. The following data are available from the last year:
By selling to the White Mountain Division, the Red River Division will avoid £3 per bag in selling costs.
- What is the maximum transfer price the White Mountain Division should be willing to pay

• A)£20
• B)£16
• C)£11
• D)£14

Understand the role of cost-benefit analysis in utilitarianism and ethical decision-making.

Grasp the concept and key factors of corporate social responsibility (CSR) in business practices.

Recognize the significance of corporate actions on stakeholders and the environment, emphasizing corporate social responsibility.

Evaluate business decisions through the lens of corporate social responsibility considering all stakeholders.

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Definitions:

Moral Hazard

The situation where one party is more likely to take risks because they do not bear the full consequences of those risks.

Hidden Action

A situation in contract theory and economics where one party's action is not observed or cannot be monitored by another, potentially leading to moral hazard.

Moral Hazard

The situation in which one party engages in risky behavior knowing that it is protected against the consequences, usually due to a contract or agreement.

Criminal Actions

Activities that are punishable by law, typically involving harm to individuals or the society at large.