Suppose Apple is selling Macintosh computers in 1996 in Germany for DM 5,500 when the exchange rate is DM 1 = $0.6If the DM rises to $0.71, what price must Apple charge to maintain its dollar unit revenue?

Question

Quizplus · Accepted Answer

To maintain its dollar unit revenue, Apple needs to adjust the price of Macintosh computers in Germany after the exchange rate changes.

Initially, the price was DM 5,500, which equals $3,300 (DM 5,500 x $0.6).

After the exchange rate rises to DM 1 = $0.71, the new dollar revenue for Apple would be $3,905 (DM 5,500 x $0.71).

To maintain the dollar revenue at $3,300, Apple needs to adjust the price in DM as follows:

$3,300 = DM x $0.71 
DM = $3,300 / $0.71 = DM 4,648.

Therefore, Apple needs to lower the price from DM 5,500 to DM 4,648 to maintain its dollar unit revenue, which is a decrease of DM 852.

Thus, the closest answer choice is D (DM 5,268), which is a decrease of DM 232 from the initial price of DM 5,500.

Suppose Apple Is Selling Macintosh Computers in 1996 in Germany