Which of the following businesses would prefer a strong U.S. dollar to a weak one?
A U.S. company that exports cars to Mexico
A French company that imports clothing from the United States
A U.S. company that imports bananas from Costa Rica***
An Indian company that imports computers from the United States
I'm Leaning towards C..
Yes, C.
Thanks!
You're welcome.
B or C
You're correct! A U.S. company that imports bananas from Costa Rica would prefer a strong U.S. dollar to a weak one. Let me explain why.
When a company imports goods, a strong currency (in this case, the U.S. dollar) gives them more purchasing power. It means that the company can exchange the strong currency for a larger amount of the foreign currency (in this case, the Costa Rican colón).
This is advantageous for the U.S. company importing bananas because they can purchase a larger quantity of bananas from Costa Rica for the same amount of U.S. dollars. With a strong U.S. dollar, the cost of importing bananas becomes relatively cheaper.
However, it's important to note that a strong U.S. dollar can have disadvantages too. It can make exports more expensive, which may negatively impact U.S. companies that export goods. Additionally, it can make foreign travel more expensive for U.S. consumers.
But in this specific scenario, where the question asks which business would prefer a strong U.S. dollar, option C, which is a U.S. company that imports bananas from Costa Rica, is the correct choice.