In the Situation of Transfer Pricing by a Multinational Firm

Multiple Choice

In the situation of transfer pricing by a multinational firm in its trade between plants located in less developed countries (LDCs) and industrialized countries (ICs) , the firm, other things equal, will, if it wants to shift recorded profits from its LDC plants to its IC plants, record a price on goods sent from LDCs to ICs that is __________ than a comparable free-market price. For goods sent from ICs to the LDCs, the firm will __________ than a comparable free-market price.

A) lower; also want to record a price that is lower
B) lower; want to record a price that is higher
C) higher; want to record a price that is lower
D) higher; also want to record a price that is higher