Answer on Economics of Enterprise Question for LaMarcus Streeter
4. A product sells for $750 in the United States. The exchange rate is $1 to 1.65 Swiss francs. If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?
a. 123.75 Swiss francs
b. 454.55 Swiss francs
c. 750.00 Swiss francs
d. 1,237.50 Swiss francs
e. 1,650.00 Swiss francs
Answer d. is correct. let's see.
We know that $1 = 1.65 Swiss francs
Also $ 750 =
X Swiss francs where X is unknown. To find it we obtain the following equation:
X= $750*1.65/1 =1237,5 Swiss francs.