Exhibit 21-7 Foreign exchange market for U.S. dollars and British pounds
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Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 21-7?
A. American goods become more popular in Great Britain.
B. British incomes rise, while U.S. incomes remain unchanged.
C. The U.S. price level rises, while the British price level remains unchanged.
D. The U.S. real interest rate rises, while the British real interest rate remains unchanged.
Answer: C
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A) $0 B) $4 C) $9 D) $36 E) 4 pizzas
A company which charges a lower price than may be indicated by economic analysis to gain a foothold in the market is practicing
A) price skimming. B) psychological pricing. C) penetration pricing. D) prestige pricing.
The conditions in which vertical relationships can enhance a firm's ability to price discriminate include
a. the manufacturer's product is of value to multiple types of customers b. the costs of arbitraging the price difference across markets is large c. the manufacturer acquires the distributer in the higher priced market d. competition provides little ability for the manufacturer to price above marginal cost
Developing countries often justify imposition of tariffs because:
a. it creates a burden on government budget. b. it is easy to collect direct taxes from people in the developing countries. c. a large number of people in the developing countries earn a taxable income. d. developing countries find income taxes difficult to levy and collect. e. the volume of imports of these countries is considerably low.