Answer: B. use of market price leads division managers to act in a manner that is inconsistent with corporate goals.
Explanation: Market-based transfer pricing is perhaps the easiest form of transfer pricing when it comes to determining the price that will be paid between divisions of the same company. It uses the normal market rate that would be paid if the goods were bought on the open market.
Transfer pricing helps in reducing duty costs by shipping goods into countries with high tariff rates at minimal transfer prices so that the duty base of such transactions is fairly low.