(1)

A vertically integrated firm has 2 divisions; upstream and downstream divisions. The upstream division produces chemical Y, whose average total cost is ATC_U = 10 + 2Q_U, where Q_Uis 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 (P_U)?

Question 55 options:

	PU = 10 + 2QU.
	PU = 10 + 4QU.
	PU = 20 + 3QU.
	PU = 20 + 6QU.
	None of the above.

Answer rating: 100% (QA)

Solution A nertically integrated flim hes downstream diuusion upstream Upstruam diisien g... View the full answer