1 First blue multiple choice option has: -12.4%, -11%, 212.4% 189 %. Second blue multiple choice option has: 170.2%, 29.8%, 42.4%, 242.4%. Third blue multiple choice option has: worsens, improves, does not change. 1. Exchange-rate fluctuations and international competitiveness Steel Block is a hypothetical U.S. steel manufacturer. The following table shows Steel Block's production costs of producing a ton of steel. Note that Steel Block denominates the costs of its inputs in dollars as well as pesos. Initially, in period 1, the exchange value of the dollar is $0.80 per peso. Complete the Period 1 section in the following table by calculating the peso equivalent of the input costs and Steel Block's total cost of producing a ton of steel. Cost of Producing a Ton of Steel Period 1: $0.80 per Peso Period 2: $0.50 per Peso Cost Equivalent (Dollar) (Peso) Cost (Dollar) Equivalent (Peso) Labor 150.00 187.50 150.00 300.00 Dollar-denominated inputs 120.00 150.00 120.00 Peso-denominated inputs 150.00 187.50 Energy cost 90.00 112.50 90.00 180.00 Total cost 510.00 Suppose that in period 2, the dollar appreciates to $0.50 per peso. Complete the "Period 2" section in the previous table by calculating the peso equivalent of the dollar-denominated costs, the dollar cost of the pesos- denominated costs, and the total costs for both currencies. Based on your calculations, the percentage change in total dollar costs of producing a ton of steel is total peso costs is whereas the percentage change in Assume Steel Block competes with Mexican producers. As a result of the dollar appreciation, Steel Block's international competitiveness Suppose Steel Block decides to denominate all of its inputs acquired domestically in dollars. Which of the following is the most likely outcome of this decision? There would be no difference in Steel Block's international competitiveness. Steel Block's competitiveness would now improve. Steel Block's international competitiveness would improve even more. Steel Block's international competitiveness would worsen even more.
1 First blue multiple choice option has: -12.4%, -11%, 212.4% 189 %. Second blue multiple choice option has: 170.2%, 29.8%, 42.4%, 242.4%. Third blue multiple choice option has: worsens, improves, does not change. 1. Exchange-rate fluctuations and international competitiveness Steel Block is a hypothetical U.S. steel manufacturer. The following table shows Steel Block's production costs of producing a ton of steel. Note that Steel Block denominates the costs of its inputs in dollars as well as pesos. Initially, in period 1, the exchange value of the dollar is $0.80 per peso. Complete the Period 1 section in the following table by calculating the peso equivalent of the input costs and Steel Block's total cost of producing a ton of steel. Cost of Producing a Ton of Steel Period 1: $0.80 per Peso Period 2: $0.50 per Peso Cost Equivalent (Dollar) (Peso) Cost (Dollar) Equivalent (Peso) Labor 150.00 187.50 150.00 300.00 Dollar-denominated inputs 120.00 150.00 120.00 Peso-denominated inputs 150.00 187.50 Energy cost 90.00 112.50 90.00 180.00 Total cost 510.00 Suppose that in period 2, the dollar appreciates to $0.50 per peso. Complete the "Period 2" section in the previous table by calculating the peso equivalent of the dollar-denominated costs, the dollar cost of the pesos- denominated costs, and the total costs for both currencies. Based on your calculations, the percentage change in total dollar costs of producing a ton of steel is total peso costs is whereas the percentage change in Assume Steel Block competes with Mexican producers. As a result of the dollar appreciation, Steel Block's international competitiveness Suppose Steel Block decides to denominate all of its inputs acquired domestically in dollars. Which of the following is the most likely outcome of this decision? There would be no difference in Steel Block's international competitiveness. Steel Block's competitiveness would now improve. Steel Block's international competitiveness would improve even more. Steel Block's international competitiveness would worsen even more.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1
First blue multiple choice option has: -12.4%, -11%, 212.4% 189 %.
Second blue multiple choice option has:
170.2%, 29.8%, 42.4%, 242.4%.
Third blue multiple choice option has:
worsens, improves, does not change.
1. Exchange-rate fluctuations and international competitiveness
Steel Block is a hypothetical U.S. steel manufacturer. The following table shows Steel Block's production costs of producing a ton of steel. Note that
Steel Block denominates the costs of its inputs in dollars as well as pesos.
Initially, in period 1, the exchange value of the dollar is $0.80 per peso.
Complete the Period 1 section in the following table by calculating the peso equivalent of the input costs and Steel Block's total cost of producing a ton
of steel.
Cost of Producing a Ton of Steel
Period 1: $0.80 per Peso
Period 2: $0.50 per Peso
Cost
Equivalent
(Dollar)
(Peso)
Cost
(Dollar)
Equivalent
(Peso)
Labor
150.00
187.50
150.00
300.00
Dollar-denominated inputs
120.00
150.00
120.00
Peso-denominated inputs
150.00
187.50
Energy cost
90.00
112.50
90.00
180.00
Total cost
510.00
Suppose that in period 2, the dollar appreciates to $0.50 per peso.
Complete the "Period 2" section in the previous table by calculating the peso equivalent of the dollar-denominated costs, the dollar cost of the pesos-
denominated costs, and the total costs for both currencies.
Based on your calculations, the percentage change in total dollar costs of producing a ton of steel is
total peso costs is
whereas the percentage change in
Assume Steel Block competes with Mexican producers. As a result of the dollar appreciation, Steel Block's international competitiveness
Suppose Steel Block decides to denominate all of its inputs acquired domestically in dollars. Which of the following is the most likely outcome of this
decision?
There would be no difference in Steel Block's international competitiveness.
Steel Block's competitiveness would now improve.
Steel Block's international competitiveness would improve even more.
Steel Block's international competitiveness would worsen even more.
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