Author Question: Differential Exchange Rates: a. can be used to promote imports of desirable and necessary goods b. ... (Read 34 times)

tingc95 · **on:** Jun 29, 2018

Differential Exchange Rates:
a. can be used to promote imports of desirable and necessary goods
b. can be used to discourage imports of less desirable and necessary goods
c. are favorable to the international firm importing products into this market
d. all of the above

Question 2

What loophole do international firms take advantage of in circumventing anti-dumping laws?
a. They modify their products slightly so as not to permit a direct comparison.
b. They use a cash-based accounting method instead of an accrual-based accounting method.
c. They set prices based on their fixed costs instead of their marginal costs.
d. All of the above are true.

fatboyy09 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D
Two types of differential exchange rates can be used. The first, which is government imposed, refers to a strategy the government uses to promote imports of desirable and necessary goods and to discourage imports of less desirable and necessary goods. A second type of differential exchange rate is favorable to the international firm importing products into this market. In this situation, a difference exists between the black market exchange rate and the official government exchange rate, with the black market rate being higher than the government rate. This may be found in the Nontariff Barriers section (3-2b).

Answer to Question 2

A
In order to avoid price discrimination charges, the importers modify their products slightly so as not to permit them to be directly compared with products sold in other countries at higher prices.