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Cost of Producing One Computer Period 1: $0.50 per Franc Cost (Dollar) 150.00 120.00 Labor Dollar-denominated inputs Franc-denominated inputs 150.00 Energy cost 90.00 Total cost 510.00 Equivalent (Franc) 300.00 240.00 180.00 Period 2: $0.40 per Franc Cost (Dollar) Equivalent (Franc) 150.00 375.00 120.00 Suppose that in period 2, the dollar appreciates to $0.40 per franc. 90.00 300.00 225.00 Complete the "Period 2" section in the previous table by calculating the franc equivalent of the dollar-denominated costs, the dollar cost of the francs- denominated costs, and the total costs for both currencies. Based on your calculations, the percentage change in total dollar costs of producing one computer is total franc costs is whereas the percentage change in Assume Comdemo competes with French producers. As a result of the dollar appreciation, Comdemo's international competitiveness

Cost of Producing One Computer Period 1: $0.50 per Franc Cost (Dollar) 150.00 120.00 Labor Dollar-denominated inputs Franc-denominated inputs 150.00 Energy cost 90.00 Total cost 510.00 Equivalent (Franc) 300.00 240.00 180.00 Period 2: $0.40 per Franc Cost (Dollar) Equivalent (Franc) 150.00 375.00 120.00 Suppose that in period 2, the dollar appreciates to $0.40 per franc. 90.00 300.00 225.00 Complete the "Period 2" section in the previous table by calculating the franc equivalent of the dollar-denominated costs, the dollar cost of the francs- denominated costs, and the total costs for both currencies. Based on your calculations, the percentage change in total dollar costs of producing one computer is total franc costs is whereas the percentage change in Assume Comdemo competes with French producers. As a result of the dollar appreciation, Comdemo's international competitiveness

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 12E
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1. Exchange-rate fluctuations and international competitiveness Comdemo is a hypothetical U.S. computer manufacturer. The following table shows Comdemo's production costs of producing one computer. Note that Comdemo denominates the costs of its inputs in dollars as well as francs. Initially, in period 1, the exchange value of the dollar is $0.50 per franc. Complete the Period 1 section in the following table by calculating the franc equivalent of the input costs and Comdemo's total cost of producing one computer. Cost of Producing One Computer Period 1: $0.50 per Franc Cost (Dollar) 150.00 120.00 Labor Dollar-denominated inputs Franc-denominated inputs 150.00 Energy cost 90.00 Total cost 510.00 Equivalent (Franc) 300.00 240.00 180.00 Period 2: $0.40 per Franc Cost Equivalent (Dollar) (Franc) 150.00 375.00 120.00 Suppose that in period 2, the dollar appreciates to $0.40 per franc. 90.00 300.00 225.00 Complete the "Period 2" section in the previous table by calculating the franc equivalent of the dollar-denominated costs, the dollar cost of the francs- denominated costs, and the total costs for both currencies. Based on your calculations, the percentage change in total dollar costs of producing one computer is total franc costs is whereas the percentage change in Assume Comdemo competes with French producers. As a result of the dollar appreciation, Comdemo's international competitiveness O Comdemo's international competitiveness would worsen even more. O Comdemo's international competitiveness would improve even more. O Comdemo's competitiveness would now improve. O There would be no difference in Comdemo's international competitiveness. Suppose Comdemo decides to denominate all of its inputs acquired domestically in dollars. Which of the following is the most likely outcome of this decision?
Transcribed Image Text:1. Exchange-rate fluctuations and international competitiveness Comdemo is a hypothetical U.S. computer manufacturer. The following table shows Comdemo's production costs of producing one computer. Note that Comdemo denominates the costs of its inputs in dollars as well as francs. Initially, in period 1, the exchange value of the dollar is $0.50 per franc. Complete the Period 1 section in the following table by calculating the franc equivalent of the input costs and Comdemo's total cost of producing one computer. Cost of Producing One Computer Period 1: $0.50 per Franc Cost (Dollar) 150.00 120.00 Labor Dollar-denominated inputs Franc-denominated inputs 150.00 Energy cost 90.00 Total cost 510.00 Equivalent (Franc) 300.00 240.00 180.00 Period 2: $0.40 per Franc Cost Equivalent (Dollar) (Franc) 150.00 375.00 120.00 Suppose that in period 2, the dollar appreciates to $0.40 per franc. 90.00 300.00 225.00 Complete the "Period 2" section in the previous table by calculating the franc equivalent of the dollar-denominated costs, the dollar cost of the francs- denominated costs, and the total costs for both currencies. Based on your calculations, the percentage change in total dollar costs of producing one computer is total franc costs is whereas the percentage change in Assume Comdemo competes with French producers. As a result of the dollar appreciation, Comdemo's international competitiveness O Comdemo's international competitiveness would worsen even more. O Comdemo's international competitiveness would improve even more. O Comdemo's competitiveness would now improve. O There would be no difference in Comdemo's international competitiveness. Suppose Comdemo decides to denominate all of its inputs acquired domestically in dollars. Which of the following is the most likely outcome of this decision?
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