Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 31, Problem 8PA

Sub part (a)

To determine

Profit per bushel of rice.

Sub part (b)

To determine

Effect on the real exchange rate.

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In our pretend world there are two countries - Chile and Switzerland - that are engaged in trade. The firm Switzerland Chocolates Express sells Boxes of chocolate (a good) in Chile. Each Box of Chocolates sells for 6500 Chilean pesos in Chile. In Switzerland, each box of chocolates 11 Swiss Franc to produce. Assume that the firm has 1 million boxes of chocolate to sell. How much money (in Swiss Franc) would the firm make (or lose) on the sale at the following exchange rates: Rate 1: 550 Pesos per Swiss Franc Rate 2: 0.0015 Swiss Franc Per Chilean Peso
If the two countries were both to benefit from trade, what's the possible range of the exchange rate, expressed in units of wine per unit of bread? Explain briefly.
a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68 per ₤1, has the pound (₤) appreciated or depreciated?  Has the dollar appreciated or depreciated?          b. What happens to the ₤-price that British residents pay for a $500             U.S. export good due to the exchange rate change above?          c. What happens to the $-price that U.S. residents pay for a ₤1200               import good from Britain?          d. How do these changes affect the economic welfare of U.S.                         exporters and U.S. importers?        2. a. If the exchange rate changes from $1.70 per British pound (₤1) to            $1.72 per ₤1, has the pound (₤) appreciated or depreciated?  Has the          dollar appreciated or depreciated?         b. What happens to the ₤-price that British residents pay for a $500              U.S. export good due to the exchange rate change above?         c. What happens to the $-price that U.S. residents pay for a ₤1200…
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