When manufacturing computer software,suppose that Microsoft Inc.uses labor and materials whose costs are denominated in dollars and francs respectively.If the dollar's exchange value depreciates 10 percent against the franc,the franc-denominated cost of the firm's software falls by 10 percent.

Question

Quizplus · Accepted Answer

The franc-denominated cost of the firm's software would remain the same because a depreciation of the dollar would make it more expensive to buy francs with dollars, thus making the cost of materials denominated in francs more expensive for the firm. Therefore, the cost of software would not decrease by 10 percent.

When Manufacturing Computer Software,suppose That Microsoft Inc