Firms Whose Currency Is Prime for Devaluation May Choose to Purchase

question 60

Multiple Choice

Firms whose currency is prime for devaluation may choose to purchase extra inventory from foreign sources before the devaluation occurs.Which of the following is NOT a potential problem associated with such a practice?

• A)As a result of holding extra inventory, the firm now has extra sales.
• B)As a result of devaluation, the local government may freeze the price at which the firm can sell its inventory.
• C)The devaluation doesn't occur and the firm now experiences additional storage costs.
• D)All of the above are potential problems.

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Definitions:

Prior Probabilities

Prior probabilities are the initial estimations of the likelihood of an event, based on existing knowledge before any new evidence is taken into account.

Likelihood Probabilities

The probabilities that express the plausibility of different parameter values given a certain outcome.

Experimental Outcome

The result observed from conducting an experiment, which can be used to test hypotheses and theories.

Perfect Information

A situation in decision theory and economics where all participants have full and identical information about the elements of the game or economic situation.