Question
A company has two divisions.Division A produces products at a constant marginal cost of $10 per unit with enough capacity to spare. Division B is
A company has two divisions.Division A produces products at a constant marginal cost of $10 per unit with enough capacity to spare. Division B is experiencing a significant problem with its production line and would like to purchase products from Division A. Division B faces the following demand curve: P = 110 - 5Q. (1) As the CFO of the entire company who knows Division A's marginal cost and Division B's demand curve, what transfer price will you set to transfer products from Division A to Division B? (2) At this transfer price, how many units will Division B purchase from Division A.
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