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An appreciation of the dollar relative to the yen will benefit:A) a firm that sells in the United States but produces in JapanB) a firm that sells in the United States and produces in the United StatesC) a firm that produces in the United States and sells in JapanD) None of the above is correct

Question

An appreciation of the dollar relative to the yen will benefit:A) a firm that sells in the United States but produces in JapanB) a firm that sells in the United States and produces in the United StatesC) a firm that produces in the United States and sells in JapanD) None of the above is correct

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Solution

The correct answer is C) a firm that produces in the United States and sells in Japan.

Here's why:

When the dollar appreciates relative to the yen, it means that the value of the dollar is increasing compared to the yen. This means that each dollar can buy more yen than before.

A) A firm that sells in the United States but produces in Japan would not benefit from this situation. This is because the cost of production in Japan would become more expensive as the dollar appreciates. The firm would need more dollars to buy the same amount of yen to cover production costs.

B) A firm that sells and produces in the United States would not be affected by the exchange rate between the dollar and the yen, as all its transactions are in dollars.

C) A firm that produces in the United States and sells in Japan would benefit from the appreciation of the dollar. This is because the firm's costs are in dollars, but its revenues are in yen. When the dollar appreciates, the firm can get more yen for each dollar of revenue. This increases the firm's profits.

Therefore, the correct answer is C) a firm that produces in the United States and sells in Japan.

This problem has been solved

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