What should price of the same ipad be in the united states

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Reference no: EM133504345

Question: An iPad costs 700 Canadian dollars. The nominal exchange rate is 1.1 Canadian per US dollar.

1. According to the law of one price, what should the price of the same iPad be in the United States?

2. If the current price is US$600, is the Canadian dollar undervalued or overvalued? overvalued? By how much?

3. Why don't we necessarily see people or companies buying iPads in the country where they are cheapest and reselling them in the other country?
(i.e. arbitration)?

4. Suppose that the Canadian government imposes an (additional) tax of 20 for every iPad sold in Canada. What can we expect?

Reference no: EM133504345

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