Question

Using the negotiated transfer pricing approach, a minimum transfer price is established by the selling division.

a) True
b) False

Answer 1

The statement is false because in the goods market, buyers may be willing to pay more than the equilibrium price.

Step-by-step explanation:

The statement is false because in the goods market, buyers may be willing to pay more than the equilibrium price.

In the goods market, equilibrium price refers to the point where the quantity demanded equals the quantity supplied. However, there can be situations where buyers have a higher willingness to pay for a product due to factors such as scarcity, exclusivity, or high demand. This can drive the price above the equilibrium price.

For example, in the case of limited edition products or high-demand items, buyers may be willing to pay a premium price to secure the product even if it exceeds the equilibrium price. Additionally, buyers may also be willing to pay more for highly differentiated products that offer unique features or superior quality.