Recently the British Pound Suffered an Unexpected Depreciation in Value

question 23

Multiple Choice

Recently the British Pound suffered an unexpected depreciation in value. Which of the following actions being considered by Coventry Furniture of London, a purely domestic furniture manufacturer and retailer, would be considered a highly unlikely response to the depreciation of the pound?

• A) Coventry might choose to maintain its domestic sales prices constant in pound terms.
• B) Coventry might try to raise domestic prices because competing imports are now priced higher in England.
• C) Coventry might try to lower domestic prices because competing imports are now priced higher in England.
• D) none of the above

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Definitions:

Variable Input

An input in the production process that can be adjusted in the short term, such as labor or raw materials, to change the output level.

Total Output

The combined quantity of production or services produced by an entity in a given period.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Costs

Expenses that change in proportion to the activity of a business, such as materials and labor.