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: Cengage Learning
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Chapter 6, Problem 7E
To determine
To ascertain the effective
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If Boeing’s dollar aircraft prices increase 20 percent and the yen/dollar exchange rate declines 15 percent, what effective price increase is facing Japan Air Lines for the purchase of a Boeing 747? Would Boeing’s margin likely rise or fall if the yen then depreciated and competitor prices were unchanged? Why?
If Boeing's dollar aircraft prices increase 25% and the yen/dollar exchange rate declines 15%, Japan Air Lines is effectively facing a price increase of 40, 2, or 10 % for the purchase of a Boeing 747. Boeing's margin would likely rise or fall if the yen depreciated and competitor prices were unchanged.
Suppose the current exchange rate is 115 yen per dollar. We currently have a demand for 50 units of our product when the unit price is 800 yen. The cost of producing and shipping the product to Japan is $6, and the current elasticity of demand is –2.5. Find the optimal price to charge for the product (in yen) for each of the following exchange rates: 60 yen/$, 80 yen/$, 100 yen/$, 120 yen/$, 140 yen/$, and 160 yen/$. Assume the demand function is linear.
Exchange Rate
Price
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Chapter 6 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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