Buster Brown shoes and McAn Shoes is a vertically integrated shoe manufacturer and shoe retail firm. Shoe retail is highly competitive. The optimal transfer price of shoes from Buster Brown to McAn Shoes is:
A) whatever the shoe manufacturer could sell shoes to other retail shoe stores
B) a price that is somewhat lower that the price it could sell shoes to other retail shoe stores
C) a price that is somewhat higher than the price it could sell to other retail shoe shore

Question

Quizplus · Accepted Answer

The optimal transfer price is what the shoe manufacturer could sell shoes to other retail shoe stores, as this reflects the opportunity cost of selling internally versus externally.

Buster Brown Shoes and McAn Shoes Is a Vertically Integrated