Orlando Co. produces home appliances and sells them in the U.S. It outsources the production of the appliances to a Chinese manufacturer, and the imported appliances are priced in dollars. Its major competitor for appliances is located in Mexico. Based on this information, Orlando Co. is subject to ____ exposure.

Question

Quizplus · Accepted Answer

Orlando Co. is subject to economic exposure because changes in exchange rates can affect its competitive position against its Mexican competitor, impacting its market share and profitability. Transaction exposure is not a concern here as the imports are priced in dollars, eliminating the risk of exchange rate fluctuations on transactions.