A Box of Chocolate Candy Costs 28

question 9

Multiple Choice

A box of chocolate candy costs 28.80 Swiss francs in Switzerland and $20 in the United States.Assuming that purchasing power parity (PPP) holds, what is the current exchange rate?

• A) 1 U.S.dollar equals 0.69 Swiss francs
• B) 1 U.S.dollar equals 0.85 Swiss francs
• C) 1 U.S.dollar equals 1.21 Swiss francs
• D) 1 U.S.dollar equals 1.29 Swiss francs
• E) 1 U.S.dollar equals 1.44 Swiss francs

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Definitions:

Total Utility

The overall satisfaction or fulfillment a consumer derives from consuming a particular quantity of goods or services.

Marginal Utility

The extra pleasure or benefit gained from consuming an additional unit of a product or service.

Total Utility

The total satisfaction received from consuming a certain amount of a good or service.

Diamond/Water Paradox

A paradox highlighting the contradiction where water, essential for survival, is inexpensive, while diamonds, with little intrinsic utility, are expensive.