Refer to the information provided in Table 20.3 below to answer the question(s) that follow.
Table 20.3 $$\begin{array} { l c c }
& \text { United States } & \text { Belgium } \
\hline \text { Raspberries } & \$ 9 & 9 \text { euros } \
\text { Chocolate } & \$ 12 & 27 \text { euros }\
\hline
\end{array}$$
-Refer to Table 20.3. Trade will flow in both directions between countries only if the price of the euro is between
A) $.40 and $.50.
B) $1.00 and $2.25.
C) $.60 and $.75.
D) $.44 and $1.00.

Question

Refer to the information provided in Table 20.3 below to answer the question(s) that follow.
Table 20.3 $$\begin{array} { l c c } 
& \text { United States } & \text { Belgium } \
\hline \text { Raspberries } & \$ 9 & 9 \text { euros } \
\text { Chocolate } & \$ 12 & 27 \text { euros }\
\hline
\end{array}$$
-Refer to Table 20.3. Trade will flow in both directions between countries only if the price of the euro is between
A) $.40 and $.50.
B) $1.00 and $2.25.
C) $.60 and $.75.
D) $.44 and $1.00.

Quizplus · Accepted Answer

For trade to flow in both directions, the price of raspberries and chocolate in one country must be cheaper than in the other when converted at the exchange rate. For raspberries, the U.S. price in euros (using the exchange rate) must be less than 9 euros for Belgium to import from the U.S., and the Belgium price in dollars (using the exchange rate) must be less than $9 for the U.S. to import from Belgium. For chocolate, the same logic applies but with $12 and 27 euros as the respective prices.1. For raspberries ($9 in the U.S. and 9 euros in Belgium), the exchange rate must make $9 less than 9 euros for Belgium to import from the U.S. and make 9 euros less than $9 for the U.S. to import from Belgium. This means the exchange rate must be more than $1 per euro (9 euros > $9) and less than $1 per euro ($9 < 9 euros) simultaneously, which is not logically possible, indicating a mistake in our initial approach regarding direct comparison without conversion.Correcting the approach: The correct method involves finding the exchange rate that makes the products competitively priced in both markets. For raspberries, the U.S. price in euros (at the correct exchange rate) should be competitive with Belgium's price, and vice versa when converted to dollars for chocolate.2. For chocolate ($12 in the U.S. and 27 euros in Belgium), the exchange rate must make $12 convert to less than 27 euros for Belgium to consider importing from the U.S., and 27 euros must convert to less than $12 for the U.S. to import from Belgium.Given the corrected understanding, we find the exchange rates that satisfy these conditions:- For raspberries to be traded both ways, the exchange rate must make $9 equivalent to less than 9 euros and 9 euros equivalent to less than $9, which is not directly feasible without the specific conversion rates. The correct approach is to find the range where both goods can be traded beneficially, considering their prices in both markets.- For chocolate, the exchange rate must make $12 less than 27 euros when converted, and 27 euros less than $12 when converted back, indicating a range where both conversions are beneficial for trade.The correct answer involves calculating these ranges based on the prices given, which was not accurately done in the initial explanation. The correct range allows for the competitive exchange of both goods, considering their prices in both currencies, which aligns with option D) $.44 and $1.00, as it provides a feasible range for the exchange rates that would allow both raspberries and chocolate to be traded between the U.S. and Belgium, considering the correction towards understanding the competitive pricing and exchange rate impact.

Refer to the Information Provided in Table 20 -Refer to Table 20