Suppose the Exchange Rate Is Such That 1 U

question 137

Multiple Choice

Suppose the exchange rate is such that 1 U.S.dollar equals 1 euro in New York and 0.9 euros in Paris.An arbitrageur would sell euros:

• A)in New York and buy U.S.dollars in Paris.
• B)in both Paris and New York at different prices.
• C)in New York while buying them in Paris.
• D)in Paris while buying them in New York.
• E)at the same price in both cities.

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Definitions:

Break-Even Sales

The amount of sales revenue required to cover all fixed and variable costs, resulting in zero net income or loss.

Variable Expenses

Variable expenses fluctuate in direct proportion to changes in activity level or volume, such as sales or production quantities.

Fixed Expenses

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

Break-Even Sales

The amount of sales revenue needed to cover all fixed and variable costs, resulting in no profit or loss.