It is argued that a policy of tax reductiontax reduction will result in: A. A shift from LRAS 2LRAS2 to LRAS 1LRAS1 with a lower price level and higher output. B. A shift from LRAS 1LRAS1 to LRAS 2LRAS2 with lower output at a lower price level. C. A shift from LRAS 2LRAS2 to LRAS 1LRAS1 with a higher price level and lower output. D. A shift from LRAS 1LRAS1 to LRAS 2LRAS2 with higher output at a lower price level

In each of the cases below, assume division x has a product that can be sold either to outside customers or to division y of the same company for use in its production process. the managers of the divisions are evaluated based on their divisional profits. case a b division x: capacity in units 200,000 200,000 number of units being sold to outside customers 200,000 160,000 selling price per unit to outside customers $ 90 $ 75 variable costs per unit $ 70 $ 60 fixed costs per unit (based on capacity) $ 13 $ 8 division y: number of units needed for production 40,000 40,000 purchase price per unit now being paid to an outside supplier $ 86 $ 74 required: 1. refer to the data in case a above. assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. what is the lowest acceptable transfer price from the perspective of the selling division? b. what is the highest acceptable transfer price from the perspective of the buying division? c. what is the range of acceptable transfer prices (if any) between the two divisions? if the managers are free to negotiate and make decisions on their own, will a transfer probably take place?