# Answer on Economics of Enterprise Question for LaMarcus Streeter

Question #7227

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

## Expert's answer

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.

the math here does not pass the common sense test. 1 US dollar = to 1.65 Francs. As there are more francs to the dollar, the equivalent number of Francs must be greater than dollars. Therefore, the appropriate math should be: 1 US Dollar / 1.65 Swiss Francs = 750 US Dollars / X Swiss Francs X = 1.65 * 750 1237.50 Swiss Francs. The correct answer is therefore D.

TJN, you are wrong. It is asking for the price in Swiss Francs. Your scenario would yield how many Swiss Francs you can get for $750. The correct answer is B.

TJN is right and CB is wrong, trust me, I just had my HW graded and I used TJN's answer.

Dear visitors, thanks for pointing out our mistake! which is now corrected. Correct answer is d.

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