1 What is the capitalist free enterprise ideal 2 IN 2017 1 E

1) What is the capitalist, free enterprise ideal?

2) IN 2017, 1 Euro= 3TL,1$= 4TL and 1 Russian Ruble = 10Turkish Lira. Therefore a shirt which sells at 240 TL in Turkey in 2017 is approximately 80 Euros, 60$ and 24 Russian Rubles. Suppose from 2017 to 2018, inflation in Turkey is %100, in Eurozone is 0%, in Usa is %50 and in Russia is %50 in 2018. Moreover, 1 Russian Ruble is 10 TL , 1 Euro= 5 TL and 1$= 20TL. What will be the direction of exports between a) USA&RUSSIA B) EUROZONE&USA c) TURKEY&RUSSA??

3) U.S, Japan, European companies are usually the first to design, invent and innovate products.

a) What happens toward the end of these new products international life cycles?

b) what must happen to the economies of these countries?

c) What actually happens to these countries?

Solution

(1)

The capitalist, free enterprise principle is based on private profit maximization. It states that a capitalist enterprise has the sole objective of profit maximization and maximum utilization of resources in order to extract the profit. It believes in private ownership of property, assets and profits.

(2)

(A)

In 2017, price of one shirt is:

In USA: $60, In Russia: Ruble 24

Inflation in USA: 50%, so domestic price of the shirt in 2018 in USA: $60 x 1.5 = $90

In 2018, 1 Ruble = 10TL & 1$ = 20TL. So, 1 Ruble = $2

2018 price of 1 USA-made shirt in Rubles = $90 / 2 = 45

Since inflation in Russia: 50%, 2018 price of 1 shirt in Russia = 24 x 1.5 = 32 Rubles

Since 32 Rubles < 45 Rubles, a shirt is cheaper in Russia. So, Russia will export shirts to USA.

(B)

In 2017, price of one shirt is:

In Eurozone: Euro 80, In USA: $60

Inflation in USA: 50%, so domestic price of the shirt in 2018 in USA: $60 x 1.5 = $90

In 2018, 1 Euro = 5TL & 1$ = 20TL. So, 1 Euro = $20/5 = $4

2018 price of 1 USA-made shirt in Euro = $90 / 4 = Euro 22.5

Since inflation in Eurozone: 0%, 2018 price of 1 shirt in Eurozone = Euro 80

Since 22.5 Euro < 80 Euro, a shirt is cheaper in USA. So, USA will export shirts to Eurozone.

(C)

In 2017, price of one shirt is:

In Turkey: 240TL, In Russia: Ruble 24

Inflation in Turkey: 100%, so domestic price of the shirt in 2018 in Turkey: 240TL x 2 = 480TL

In 2018, 1 Ruble = 10TL

2018 price of 1 Turkey-made shirt in Rubles = 480TL / 10 = 48 Rubles

Since inflation in Russia: 50%, 2018 price of 1 shirt in Russia = 24 x 1.5 = 32 Rubles

Since 32 Rubles < 48 Rubles, a shirt is cheaper in Russia. So, Russia will export shirts to Turkey.

NOTE: Out of 3 multi-part questions, the first 2 are answered in full.