Other Things Equal, and Assuming Efficient Markets, If a Honda

question 23

Multiple Choice

Other things equal, and assuming efficient markets, if a Honda Accord costs $21,375 in the U.S. then at an exchange rate of $1.98/£, the Honda Accord should cost ________ in Great Britain.

• A)£21,375
• B)£18,365
• C)£10,795
• D)£42,322

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Definitions:

Competitive Price-searcher Market

A market structure where firms set their own prices because products are differentiated, giving them some degree of pricing power.

Average Total Cost

The cost per unit produced, found by taking the total production costs and dividing it by the quantity of items produced.

Price-taker Firm

A firm that has no control over the market price and must accept the prevailing market price for its product or service.

Competitive Price-searcher Firm

A business that operates in a market where firms have some degree of control over the prices they charge, often because of product differentiation.