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Answer to Question #7227 in Economics of Enterprise 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.

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Comments

Assignment Expert
10.04.14, 16:18

Assignment Expert
10.04.14, 15:55

Assignment Expert
20.06.13, 14:42

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

DTM
20.06.13, 06:32

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

CB
14.03.13, 03:55

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
15.12.12, 03:53

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.

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