In a diversified firm, market prices are set by a firm's corporate management to accomplish corporate objectives while transfer prices are determined by the market forces of supply and demand.

Question

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In a diversified firm, both market prices and transfer prices are determined by corporate management based on their objectives for the different business units within the firm. Market forces of supply and demand do not necessarily determine transfer prices as they may involve transactions between different departments or subsidiaries within the same firm.

In a Diversified Firm, Market Prices Are Set by a Firm's