A multinational corporation has two semiautonomous divisions: production and marketing. The production division manufactures a product that is purchased and then resold by the marketing division. The marginal cost functions for the production division and for the value added by the marketing division are defined below. MCP = 200 + 3Q MCM = 4Q The demand function for the final product is: QD = 600 - P Assume that the external market for the output of the production division is perfectly competitive and that the market price is $300.
A multinational corporation has two semiautonomous divisions: production and marketing. The production division manufactures a product that is purchased and then resold by the marketing division. The marginal cost functions for the production division and for the value added by the marketing division are defined below.
MCP = 200 + 3Q
MCM = 4Q
The demand function for the final product is:
QD = 600 - P
Assume that the external market for the output of the production division is
How many units should be produced by the production division?
How many units should be purchased by the marketing division?
What transfer price should be paid to the production division by the marketing division?
What price should be charged for the final product by the marketing division?
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