MICROECONIMICS
5th Edition
ISBN: 9781319372101
Author: KRUGMAN
Publisher: MAC HIGHER
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Question
Chapter 9A, Problem 1P
To determine
To calculate:
The present value by considering the given situation
Concept Introduction:
Present value: The present value is the current worth of a future sum of money on a given interest rate
The present value is calculated by the following formula
- PV
= Cash flow at period 
=
=number of periods.
Expert Solution & Answer
Explanation of Solution
- The
net present value of plan (i) is calculated by the following - The present value of the (i) plan can be found out by the following
The present value of the (ii) is calculated by the following way
- =
= 
=
So plan (i) is considered to be less as compared to plan (ii)
- =
= 
The present value of the (ii) plan can be found out by the following
- =
= 
= 
So now the plan (ii) is less expensive
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Responsd to Luis Rodriguez
1800 tons of pomegranates a year is a lot of sweetness!
So, you can get 71 Afghanis for $1? How cool. Does that mean you can buy a lot of stuff in Afghanistan for only $1? How do you know that your purchasing power in Afghanistan is stronger than in the United States?
Yes, with an exchange rate of 71 Afghan Afghani for 1 US dollar, you can buy many things in Afghanistan for just $1. However, purchasing power isn't solely determined by the exchange rate. It also depends on the cost of goods and services in each country. For example, if a meal in Afghanistan costs 200 Afghanis, you would need about $2.82 to buy that meal in US dollars (since 200 Afghanis divided by 71 Afghanis per dollar equals approximately $2.82). So, while the exchange rate allows you to get more Afghanis for your dollars, you also need to consider how much things cost in Afghanistan.
Now that the world seems to like Afghani stuff and is buying more of it, does that mean your…
Chapter 9A Solutions
MICROECONIMICS
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