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The Transfer Price of an Upstream Product Should Always Equal

Question 2

Multiple Choice

The transfer price of an upstream product should always equal the market price when:


A) there is an outside market for the upstream product.
B) the price elasticity of demand for the upstream product is greater than 1 (in absolute value) .
C) there is a perfectly competitive market for the downstream product.
D) the marginal cost of the downstream product is greater than 1.
E) the firm is a monopolist in its downstream market.

Correct Answer:

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