Find what is the current profit to the exporter

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Reference no: EM13232701

BMW sells 5,000 vehicles in the US. The export price is €40,000. The exchange rate is €1= $1.25. US price elasticity of demand for the German import, in terms of the $ price, is-2. The cost of each vehicle is €30,000.

a. What is the current € profit to the exporter?

b. Suppose the € depreciates to a new rate €1= $1.15. How many cars will the US buy? What will be € profits to BMW?

c. If BMW adjusts its € price to maintain the original $ price, how high will it be its € profits?

d.Therefore, should the car maker keep the original € price, the original $ price or do nothing?

Reference no: EM13232701

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