Table 14.1.Hypothetical Costs of Producing an Automobile for Toyota Inc.of Japan

-Refer to Table 14.1.Assume that Toyota Inc.imports steel from U.S.suppliers,whose costs are denominated in dollars,while all other inputs are obtained from Japanese suppliers whose costs are denominated in yen.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the dollar-equivalent cost of a Toyota automobile equals:
A) $24,000
B) $30,000
C) $36,000
D) $42,000

Question

Table 14.1.Hypothetical Costs of Producing an Automobile for Toyota Inc.of Japan
 
-Refer to Table 14.1.Assume that Toyota Inc.imports steel from U.S.suppliers,whose costs are denominated in dollars,while all other inputs are obtained from Japanese suppliers whose costs are denominated in yen.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the dollar-equivalent cost of a Toyota automobile equals:
A) $24,000 
B) $30,000 
C) $36,000 
D) $42,000

Quizplus · Accepted Answer

If the yen appreciates, it takes fewer yen to equal one dollar. This means the cost of inputs from Japanese suppliers (denominated in yen) will decrease in dollar terms, while the cost of U.S. steel (denominated in dollars) remains the same. This results in a lower overall dollar-equivalent cost for the automobile.

Table 141Hypothetical Costs of Producing an Automobile for Toyota Inc