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12. (Scenario: United States and Mexico Automobile Production) Refer to the information provided. Suppose that U.S. auto producers decide to raise prices to take advantage
12. (Scenario: United States and Mexico Automobile Production) Refer to the information provided. Suppose that U.S. auto producers decide to raise prices to take advantage of their comparative advantage. Given the exchange rate is P10 = $US1 and trade costs of 10%, what is the maximum price that they can establish (net of trade costs) that will just allow them to sell U.S. autos at the same price as Mexican-produced autos? A) $20,000 B) $18,000 C) $21,000 D) $20,909
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