Question 55 A vertically integrated firm has 2 divisions; upstream and downstream divisions. The upstream division produces chemical Y, whose average total cost is ATCU = 10 + 2QU, where Qu is the quantity of Y. The downstream division has its own average total cost of ATC = 20 + 3Q where Q is the quantity of the firm's final product. There is no external market. What is the transfer price (Pu)? Question 55 options: PU = 10 + 2QU. PU = 10 + 4QU. Pu = 20 + 3QU. PU = 20 + 6QU. %3D None of the above.

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Question 55
A vertically integrated firm has 2 divisions; upstream and downstream divisions.
The upstream division produces chemical Y, whose average total cost is ATCU =
10 + 2QU, where Qu is the quantity of Y. The downstream division has its own
average total cost of ATC = 20 + 3Q where Q is the quantity of the firm's final
product. There is no external market. What is the transfer price (Pu)?
Question 55 options:
PU = 10 + 2QU.
PU = 10 + 4QU.
Pu = 20 + 3QU.
PU = 20 + 6QU.
%3D
None of the above.
Transcribed Image Text:Question 55 A vertically integrated firm has 2 divisions; upstream and downstream divisions. The upstream division produces chemical Y, whose average total cost is ATCU = 10 + 2QU, where Qu is the quantity of Y. The downstream division has its own average total cost of ATC = 20 + 3Q where Q is the quantity of the firm's final product. There is no external market. What is the transfer price (Pu)? Question 55 options: PU = 10 + 2QU. PU = 10 + 4QU. Pu = 20 + 3QU. PU = 20 + 6QU. %3D None of the above.
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