Company MHF Operates Subsidiaries in Two Countries

question 74

Multiple Choice

Company MHF operates subsidiaries in two countries.One of the subsidiaries consumes the output of the other in the production of a good for sale to the public.The company could increase cash flows by:

• A)Using a transfer price based on full cost.
• B)Using a transfer price to transfer as much income as possible to the subsidiary located in the lower tax country.
• C)Using a transfer price based on market value.
• D)Using a transfer price to transfer as much income as possible to the subsidiary located in the higher tax country.

---

Definitions:

Indifference Curves

A graph showing different bundles of goods between which a consumer is indifferent, illustrating preferences and trade-offs.

Market Prices

The current price at which a good or service can be bought or sold in a marketplace, determined by supply and demand dynamics.

Income Source

The origin or means through which an individual, company, or entity earns money.

Utility Function

An expression that captures how a consumer ranks different bundles of goods based on the level of utility or satisfaction each bundle provides.