For Both Parties to Gain from Trade, the Price at Which

question 30

True/False

For both parties to gain from trade, the price at which they trade must lie exactly in the middle of the two opportunity costs.

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Definitions:

Total Fixed Manufacturing

The summation of all the costs that do not change with the level of production, including salaries, rent, and insurance.

Profit Margin

A component of the rate of return on investment, computed as the ratio of income from operations to sales.

Market Selling Price

The price at which a product is sold to the public, determined by supply, demand, and other market factors.

Target Costing

The target cost is determined by subtracting a desired profit from a market-determined price. The resulting target cost is used to motivate cost improvements in design and manufacture.