Suppose that Great Britain is a major export market for your firm, a U.S. based MNC. If the British pound depreciates against the U.S. dollar,
A. Your firm will be able to charge more in dollar terms while keeping pound prices stable.
B. Your firm may be priced out of the U.K. market, to the extent that your dollar costs stay constant and your pound prices will rise.
C. To protect U.K. market share, your firm may have to cut the dollar price of your goods to keep the pound price the same.
D. b) and c) are both correct.
Answer:B
Suppose that Great Britain is a major export market for your firm, a U.S. based MNC. If the British pound depreciates against the U.S. dollar,
A. Your firm will be able to charge more in dollar terms while keeping pound prices stable. B. Your firm may be priced out of the U.K. market, to the extent that your dollar costs stay constant and your pound prices will rise. C. To protect U.K. market share, your firm may have to cut the dollar price of your goods to keep the pound price the same. D. b) and c) are both correct.