If a Certain Automotive Part Can Be Purchased in Mexico

question 137

Multiple Choice

If a certain automotive part can be purchased in Mexico for 60 pesos or in the United States for $6.25 and if the nominal exchange rate is 8 pesos per U.S. dollar, then the automotive part:

• A)is less expensive in Mexico.
• B)is more expensive in the United States.
• C)is less expensive in the United States.
• D)costs the same in Mexico and the United States.

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Definitions:

Profits Maximization

Aiming to achieve the highest possible profits through decision-making related to business operations and finance.

Price Elasticity

A measure of how much the demand for a good or service changes in response to a change in its price.

Marginal Cost

The extra expense associated with manufacturing an additional unit of a product or service.

Japanese Firm

A business entity operating in Japan, characterized by specific cultural, management, and operational practices distinct to the Japanese economic and business environment.