You can manufacture a product in the US and transfer it to Europe.If the marginal cost (MC)is $3 per unit,and the market price in Europe is $5 per unit,should the product be manufactured?
A)No,because the net receipt of $5 is larger than the MC in the US.
B)Yes,because the gross receipt of $3 is larger than the MC in the US.
C)No,because the net receipt of $3 is the same as the MC in the US.
D)Yes,because the net receipts in Europe will exceed the MC in the US.

Question

Quizplus · Accepted Answer

The product should be manufactured because the net receipts in Europe ($5 per unit) are larger than the marginal cost of manufacturing in the US ($3 per unit). This means that there will be a profit from selling the product in Europe after the cost of manufacturing is taken into account.

You Can Manufacture a Product in the US and Transfer