The Figure Given Below Depicts the Foreign Exchange Market for British

question 56

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Suppose purchasing power parity exists in the car stereo market in the United States and Australia. If a car stereo costs $230 in the United States and the exchange rate is $1 = $AUD1.67, the same car stereo may be purchased in Australia for approximately:

• A)$AUD 138.
• B)$AUD 230.
• C)$AUD 2,300.
• D)$AUD 384.
• E)$AUD 108.

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Definitions:

MR

Marginal Revenue, the additional income that is gained from selling one more unit of a good or service.

Purely Competitive Seller

A seller operating in a market where there are many buyers and sellers, no barriers to entry, and products are homogenous, leading to perfect competition.

Total Fixed Cost

The sum of all costs that do not change with the level of output, such as rent, salaries, and insurance premiums.

Short Run

A period in which at least one factor of production is fixed, limiting the ability of a business to adjust to changing market conditions fully.