Answer :
Sure, let's analyze the consequences step-by-step.
### Step 1: Understanding Exchange Rates
Exchange rates determine how much one currency is worth in terms of another. In this case:
- Initially, 1 Canadian Dollar (C[tex]$) trades for 0.89 US Dollars (US$[/tex]).
- Later, 1 Canadian Dollar (C[tex]$) trades for 0.90 US Dollars (US$[/tex]).
### Step 2: Revenue Calculation at Initial Exchange Rate
First, convert the price per tonne from US dollars to Canadian dollars using the initial exchange rate.
- Price per tonne in US dollars (USD): \[tex]$700. - Initial exchange rate: 0.89 US$[/tex] per C[tex]$. To convert this to Canadian dollars, we divide the USD price by the exchange rate: \[ \text{Revenue in CAD} = \frac{\text{Price in USD}}{\text{Initial Exchange Rate}} = \frac{700 \text{ USD}}{0.89 \text{ USD/CAD}} \] \[ \text{Revenue in CAD} = 700 / 0.89 \approx 786.52 \text{ CAD} \] This means, initially, the producer gets approximately C\$[/tex]786.52 per tonne of newsprint.
### Step 3: Revenue Calculation at New Exchange Rate
Now, convert the price per tonne from US dollars to Canadian dollars using the new exchange rate.
- New exchange rate: 0.90 US[tex]$ per C$[/tex].
To convert this to Canadian dollars, we again divide the USD price by the new exchange rate:
[tex]\[ \text{Revenue in CAD} = \frac{\text{Price in USD}}{\text{New Exchange Rate}} = \frac{700 \text{ USD}}{0.90 \text{ USD/CAD}} \][/tex]
[tex]\[ \text{Revenue in CAD} = 700 / 0.90 \approx 777.78 \text{ CAD} \][/tex]
This means, with the new exchange rate, the producer will get approximately C\[tex]$777.78 per tonne of newsprint. ### Step 4: Calculating the Change in Revenue To find the change in revenue, we subtract the new revenue from the initial revenue: \[ \text{Change in Revenue} = \text{New Revenue in CAD} - \text{Initial Revenue in CAD} \] \[ \text{Change in Revenue} = 777.78 \text{ CAD} - 786.52 \text{ CAD} \approx -8.74 \text{ CAD} \] ### Conclusion The change in the exchange rate from 0.89 USD/CAD to 0.90 USD/CAD results in a decrease in the revenue per tonne for the Canadian producer. Specifically, the producer's revenue per tonne decreases by approximately C\$[/tex]8.74.
### Step 1: Understanding Exchange Rates
Exchange rates determine how much one currency is worth in terms of another. In this case:
- Initially, 1 Canadian Dollar (C[tex]$) trades for 0.89 US Dollars (US$[/tex]).
- Later, 1 Canadian Dollar (C[tex]$) trades for 0.90 US Dollars (US$[/tex]).
### Step 2: Revenue Calculation at Initial Exchange Rate
First, convert the price per tonne from US dollars to Canadian dollars using the initial exchange rate.
- Price per tonne in US dollars (USD): \[tex]$700. - Initial exchange rate: 0.89 US$[/tex] per C[tex]$. To convert this to Canadian dollars, we divide the USD price by the exchange rate: \[ \text{Revenue in CAD} = \frac{\text{Price in USD}}{\text{Initial Exchange Rate}} = \frac{700 \text{ USD}}{0.89 \text{ USD/CAD}} \] \[ \text{Revenue in CAD} = 700 / 0.89 \approx 786.52 \text{ CAD} \] This means, initially, the producer gets approximately C\$[/tex]786.52 per tonne of newsprint.
### Step 3: Revenue Calculation at New Exchange Rate
Now, convert the price per tonne from US dollars to Canadian dollars using the new exchange rate.
- New exchange rate: 0.90 US[tex]$ per C$[/tex].
To convert this to Canadian dollars, we again divide the USD price by the new exchange rate:
[tex]\[ \text{Revenue in CAD} = \frac{\text{Price in USD}}{\text{New Exchange Rate}} = \frac{700 \text{ USD}}{0.90 \text{ USD/CAD}} \][/tex]
[tex]\[ \text{Revenue in CAD} = 700 / 0.90 \approx 777.78 \text{ CAD} \][/tex]
This means, with the new exchange rate, the producer will get approximately C\[tex]$777.78 per tonne of newsprint. ### Step 4: Calculating the Change in Revenue To find the change in revenue, we subtract the new revenue from the initial revenue: \[ \text{Change in Revenue} = \text{New Revenue in CAD} - \text{Initial Revenue in CAD} \] \[ \text{Change in Revenue} = 777.78 \text{ CAD} - 786.52 \text{ CAD} \approx -8.74 \text{ CAD} \] ### Conclusion The change in the exchange rate from 0.89 USD/CAD to 0.90 USD/CAD results in a decrease in the revenue per tonne for the Canadian producer. Specifically, the producer's revenue per tonne decreases by approximately C\$[/tex]8.74.
