Exploring Economics
Exploring Economics
7th Edition
ISBN: 9781305465596
Author: Sexton
Publisher: Cengage
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Chapter 29, Problem 8P
To determine

(a)

To explain:

If a product is sold at $ 100 in the Unites States, the price of the product in the United Kingdom is to be ascertained given the exchange rate between the British pounds and the US dollars is $2 per pound.

To determine

(b)

To explain:

If a product is sold at $ 100 in the Unites States, the price of the product in the Mexico is to be ascertained given the exchange rate between the Mexican peso and the US dollars is 125 pesos per dollar.

To determine

(c)

To explain:

The impact that will take place to the price of the product whose current price is $100 in the USA if the tastes and preference of the US residents changes towards foreign goods.

To determine

(d)

To explain:

The impact that will take place to the price of the product whose current price is $100 in the USA in a foreign land if the income of the foreign country declines.

To determine

(e)

To explain:

The impact that will take place to the price of the product whose current price is $100 in the USA in a foreign land if the interest rate in the USA falls relative to the interest of the other countries.

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11:44 Fri Apr 4 Would+You+Take+the+Bird+in+the+Hand Would You Take the Bird in the Hand, or a 75% Chance at the Two in the Bush? BY VIRGINIA POSTREL WOULD you rather have $1,000 for sure or a 90 percent chance of $5,000? A guaranteed $1,000 or a 75 percent chance of $4,000? In economic theory, questions like these have no right or wrong answers. Even if a gamble is mathematically more valuable a 75 percent chance of $4,000 has an expected value of $3,000, for instance someone may still prefer a sure thing. People have different tastes for risk, just as they have different tastes for ice cream or paint colors. The same is true for waiting: Would you rather have $400 now or $100 every year for 10 years? How about $3,400 this month or $3,800 next month? Different people will answer differently. Economists generally accept those differences without further explanation, while decision researchers tend to focus on average behavior. In decision research, individual differences "are regarded…
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