1. Albion, a UK maker of personal computers, imports microprocessors from Intel, a US firm. There are few alternatives to what Intel produces, so Albion must by from Intel, even if the price increases. On the other hand, there are many other computers that UK consumers can buy. So, if Albions computers increase in price, consumers will just buy from another company. Suppose the pound weakens versus the dollar, from 1.60/pound to 1.40/pound.

   1. Albion will be unable to pass the entire high cost along to its UK customers, and its profits will decrease

   2. Albion will be able to pass the entire higher cost along to its UK customers, and its profits will be unaffected

   3. Albion will gain competitiveness versus its UK competitors if the UK imposes tariffs on imported technology

   4. Albion will be unable to pass along the entire cost increase to its clients because the demand for its computers is inelastic