Advanced pricing techniques

Homework Exercise 7 Economic Concepts Fall Multiple Choices (2 points each) Use the following figure to answer questions 4 Which of the following statements is true?
a. The quantity of pounds demanded falls when the dollar appreciates.
A. Law of Demand and Supply or the graph shows that as the quantity of pounds rises in circulation the demand decreases leading to a decrease in price.
2. at the price of $2 for £1 in the figure above:
B. the quantity of pounds supplied equals the quantity demanded.
B. it is the equilibrium point
3. Other things equal, a leftward shift of the demand curve in the figure above
A. would depreciate the dollar.
A. the dollar would reduce amount of pounds exchanged to a dollar
4. Other things equal, a rightward shift of the supply curve in the figure above would
C. appreciates the dollar and might be caused by a significant rise of real interest rates in the United States.
C. Higher interest rate cause an appreciation of the dollar price exchange
5. You live in Mexico and wish to buy a BMW automobile made in Germany. In Germany, the price of the BMW you wish to buy is 100, 000 euros (€). Using the “ Key Currency Cross Rates Table” provided above, what is the peso price of this car in Mexico City (ignore taxes, transport fees, and dealer preparation fees)?
b. 1. 67 million pesos
B. 16. 704 *100000= 1670400 pesos
6. Using the “ Key Currency Cross Rates Table”, what is the value of Japanese Yen/British pound (YEN/POUND)?
b. 124. 88 pounds
B. Japanese yen to pound
7. If the pound price of the yen falls (YEN/POUND),
d. both a and c
D. The shift in prices of yen affects purchases of goods and services in Japan and britain
8. Which of the following circumstances could cause EURO/USD to fall?
a. Currency speculators believe the dollar is undervalued in terms of the euro.
A. the euro will be demanded more for less USD
9. What happens when the supply of euros increases?
b. Euro/Yen falls
the demand from yen will fall
10. As the US becomes more energy independent, this will decrease the demand for currencies of nations that export oil to the US (Canada, Mexico, Saudi Arabia, and Brazil). What happens when demand for pesos decreases?
b. USD/PESO rises
investors will need more pesos to purchjase goods or services in USD
Fill-in-the-Blank (2 points each blank)
3. Use the production possibilities for US and China given below. (24 points @ 1 point each blank)
US Production Possibilities
Product
A
B
C
D
E
F
Apparel (1000 units)
10
8
6
4
2
0
Chemicals (tons)
0
4
8
12
16
20
China Production Possibilities
Product
R
S
T
U
V
W
Apparel (1000 units)
30
24
18
12
6
0
Chemicals (tons)
0
6
12
18
24
30
Before specialization and trade occur, the optimal product mix for US is combination D and for China is combination S.
b. Calculate the four opportunity costs for China and US in the production of apparel and chemicals. Record your calculations on ANSWER page below:
c. Opportunity costs are ___decreasing_______________ (decreasing, constant, increasing) in US.
Opportunity costs are _____increasing_____________ (decreasing, constant, increasing) in China.
d. China has an absolute advantage in _______Apparel___________________ (apparel, chemicals, both apparel and chemicals, neither apparel nor chemicals). US has an absolute advantage in ______________Chemicals____________ (apparel, chemicals, both apparel and chemicals, neither apparel nor chemicals).
e. China has a comparative advantage in ________ both apparel and chemicals __________________ (apparel, chemicals, both apparel and chemicals, neither apparel nor chemicals). US has a comparative advantage in __________ neither apparel nor chemicals ________________ (apparel, chemicals, both apparel and chemicals, neither apparel nor chemicals).
f. If US and China specialize in their comparative advantages:
US chooses point ___C__ (A, B, C, D, E or F).
China chooses point ___T__ (R, S, T, U, V or W).
g. Compared to the initial optimal product combinations D and S, world output of chemicals is ________smaller________ (smaller, greater) by __18___ tons of chemicals and world output of apparel is ________greater________ (smaller, greater) by __28___ 1000 units of apparel.
h. 1A= 1. 5C
i. Based on the actual terms of trade in previous part of this question, US can now choose four 1000 units of apparel and ___1. 5___ tons of chemicals and China can now choose six tons of chemicals and ___1. 5___ 1000 units of apparel. Specialization and trade between the two nations has ______decreased________ (decreased, increased) the standard of living in US and has ________Increased______ (decreased, increased) the standard of living in China.