If a firm has a marketing division and a production division with increasing costs,and a competitive external market for the production division's output exists,then the marketing division should always buy:
A) from the production division at production's price.
B) all it wants at the external market price from the production division.
C) only externally.
D) all the production division can produce at the external price.
E) what it wants at the external market price, first from whatever the production division wishes to sell and then, if necessary, externally.

Question

Quizplus · Accepted Answer

The marketing division should try to maximize its profits by buying at the lowest price possible. If it only buys from the production division at production's price, it may miss out on lower costs available in the external market. However, the marketing division may try to buy from the production division first because it helps to support the internal operations of the firm. Therefore, the best choice would be to buy what it wants at the external market price, first from whatever the production division wishes to sell and then, if necessary, externally.

If a Firm Has a Marketing Division and a Production