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1. Suppose that two countries, Vietnam and Cte d'Ivoire, produce coffee. The currency unit used in Vietnam is the dong (VND). Cte d'Ivoire is a
1. Suppose that two countries, Vietnam and Cte d'Ivoire, produce coffee. The currency unit used in Vietnam is the dong (VND). Cte d'Ivoire is a member of Communaut Financire Africaine (CFA), a currency union of West African countries that use the CFA franc (XOF). In Vietnam, coffee sells for 5,000 dong (VND) per pound. The exchange rate is 30 VND per 1 CFA franc, ENND/XOF 30 a. If the law of one price holds, what is the price of coffee in Cte d'Ivoire, measured in CFA francs: b. Assume the price of coffee in Cte d'Ivoire is actually 160 CFA francs per pound of coffee. Compute the relative price of cof- fee in Cte d'Ivoire versus Vietnam. Where they sell coffee in this case? How will these Vietnam? In Cte d'Ivoire? will coffee traders buy coffee? Where will transactions affect the price of coffee in
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