Sam owns a tire shop. He needs to decide whether to stock tires from a firm in M

Question

Sam owns a tire shop. He needs to decide whether to stock tires from a firm in Mexico that sells tires at a price of 1,800 pesos per tire or from a U.S. firm that sells tires for $129 per tire. Assume the peso-dollar exchange rate is 13 (this means 13 pesos can be purchased with $1). Which of the following equations should Sam use to convert the peso cost of tires to U.S. dollars? A. Peso cost Dollar cost Dollar costDollars B. Dollars Dollar cost Peso costx om OC. Pesos Dollar iDollar cost-Peso cost x D. Peso cost Pesos Dollar cost Using this equation, the dollar cost to Sam of buying a tire from Mexico is s(Round your response to two decimal places as needed) Given your answer, Sam should buy tires from

Explanation / Answer

1) To convert the currency, 1800 pesos will be converted into dollars by using exchange rate of dollar-pesos. This implies dollar cost = 1800 pesos * $1/13 pesos

Hence option B is correct

2) As mentioned, the dollar cost of tyre is 1800/13 or $138. This is higher than the $129 per tyre. So he must buy the cheaper product from USA.

3) The demand curve for dollars exhibits the quantity of dollars demanded at various levels of exchange rate. So the correct option is C.

4) When appreciates, the price of dollar increases and its demand falls, just as a normal commodity. So it becomes expensive to buy dollar-dominated goods.

Hence option A is correct.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.