The question is given below. COMPLETE

Global Enterprises Global Enterprises is a recently acquired U.S. manufacturing subsidiary located in Zonolia. Its products are marketed principally in Zonolia with sales invoiced in zonolia's, the local currency (FC) and prices determined by local competitive conditions. Expenses (labor, materials, and other production costs) are mostly local although a significant quantity of components is imported from the U.S. parent. Financing is primarily in U.S. dollars and provided by the parent. With the recent issuance of FAS No. 52 in the United States, headquarters management is faced with the decision of choosing a functional currency designation for its Zanolian operation; that is, should t be the U.S. dollar or the local currency? You are asked to advise management o the appropriate currency designation as well as its relative financial statement effects. A report that supports your recommendations and identify any policy issues uncovered by your analysis. Comparative balance sheets for Global Enterprises at 2024, are presented below. The statements conform with U.S. generally accepted accounting principles prior to translation to dollars. Financial Statements of Global Enterprises ______________________ Balance Sheet 12/31/2023 12/31/2024 ______________________ Cash FC 300 FC 500 Accounts receivable (net) 1,300 1000 Inventories 1,200 1,500 Fixed assets (net) 9,000 8,000 Total assets FC 11,800 FC 11,000 Accounts payable FC 2,200 FC 2,400 Long-term debt 4,400 3,000 Capital stock 2,000 2,000 Retained earnings 3,200 3,600 Total liability & OE FC 11,800 FC 11,000 Income Statement Year ended 12/31/2024 ______________________ Sales FC 10,000 Expenses: Cost of sales 5,950 Depreciation (st. line) 1,000 Other 1,493 8,443 Operating income FC 1,557 Income taxes 467 Net income FC 1,090 _______________________ Note: Capital stock was issued and fixed assets acquired when the exchange rate was FC1 = $.20. Inventories at January 1, 2024 were acquired during the fourth quarter of 2023. Purchases (FC 6,250), sales other expenses and dividends (FC690) occurred evenly during 2024. Retained earnings in US dollars at December 31, 2023, under the temporal method, were $526; under current rate method, $796. Global Enterprise's beginning-of-period cumulative translation adjustment was $270. Relevant exchange rates were:

4. A monopoly rm 1 knows that rm E is considering entering its market and knows that the product design team at rni E is either good (G) or bad (B). Firm I initially believes that the design team is more likely good than bad. Firm E knows the quality of its design team. If E decides to enter the market, it can do so with either a high or low investment. If the investment is high and the design team is good, then E's product quality is high. If the investment is low and the design team is bad, the product quality is low. The product quality is medium if either the investment is high and the design tearn is bad or else if the investment is low and the design team is good. Firm I can see the quality of E's product (high, medium, or low), but does not directly know the quality of E's design team before deciding whether to ght or accornmodate E in the market. If E stays out of the market, its payoff is O and 1's is 5. The two tables below show the payo's to E and I, depending on their decisions, when E enters the market. The left table shows the payoffs when E's design team is good and right table shows the payoffs if the team is bad. The structure of this interaction is common knowledge to E and I. E\\I Fight Accomm. I Good Design: High 0, l 5, 0 Bad Design: Low 1, 2 3, 1 a. The interaction between E and I can be represented by a game with the tree above. Writing on this sheet, label the moves, the players that move them, and the payoffs in the tree above. ('I'urn in this sheet with your bluebook.) Explain briey how you can tell which player moves in which information set. b. Explain how you can tell that the decisions represented in the tables above are not the players' pure strategies. List all of E's pure strategies in the game. 0. How many pure strategies does I have in the game? Give examples of two of them. (:1. Does E have any weakly dominated strategies in the game? If so nd one. e. Find every sequential equilibrium (SE) in which I plays a pure strategy. Justify your answer. Explain what the outcomes SE are and discuss whether they are plausible. Is there an SE in which I can detect for sure whether or not E's design team is good? f. Is there a Nash equilibrium (NE) in which E chooses not to enter the market no matter What? If so, discuss the plausibility of this outcome. If not, explain why not. is possible that some rms do not produce in a PE allocation. What can be said about which rms they are? C. Compare the levels of food consumption by different consumers in a given PE allocation. Compare the levels of food consumption that any given consumer gets in different PE allocations for the same economy. Explain how the different PE allocations differ from each other. d. Dene a competitive (Walrasian) equilibrium (CE) for this economy. Characterize a CE in which money is numeraire (assuming that such a CB exists). Be as specic as possible. For each rm i that produces in a GE, nd an inequality that relates K7; to the output level and the marginal and total cost of rm i in equilibrium. e. Is a CE allocation necessarily Pareto efficient in this economy? f. Show that a CB allocation does not necessarily exist in this economy. Explain why CE might not exist. Use the notation above to specify an allocation that might plausibly arise if no CE exists. What can be said about how this allocation compares to PE allocations? 3. Consider the pricing problem faced by a monopolistic seller. There is a continuum of potential buyers of size 1. Each buyer demands at most one unit of the good. Buyers are of three types, 2' = O, 1, 2. Each type 7; buyer values one unit of the good at Y/Z; = Eli-MES, Where 2 Z O is the quality of the good and (9.; is a parameter that describes the buyer's taste for quality. Assume O O is constant, to produce one unit of the good of quality x. The monopolist's payoff is its expected prot. The buyers get payoffs equal to the value to them of what they buy minus what they pay. a. Suppose the monopolist can directly observe buyer type and can offer contracts contin gent on type. Characterize the prot maximizing set of contracts for the monopolist. For the rest of the problem, suppose that types are not observable to the monopolist. The monopolist offers a menu of contracts of the form (19,-, xi) where a type 7) contract is meant for type 2' buyers. b. Formulate the monopolist's pricing problem with incentive and participation constraints, assuming each buyer has a reservation payo' equal to zero. c. Consider the relaxed monopoly pricing problem (RP) in which only the following down ward adjacent incentive constraints (DAIC) and a participation constraint (PO) for type i = O are imposed. 92\\/552 \" F2 2 6'2x/331 P1, (DAIC2) 91x/x1 - p1 2 eldxo p0, (DAICl) eox/IEo Po 2 0 (PC) Show that all these constraints bind in a solution to this relaxed problem. d. Show that if the solution obtained in the relaxed problem (RP) satises monotonicity, i.e. :23 2 3:\"; 2 2:3, then all of the incentive constraints and participation constraints in the original problem are satised and the solution to the relaxed problem is also a solution to the original problem. e. Solve the relaxed problem (RP). Compare the optimal quality levels (32;, ac'f, $3) to the quality levels the monopolist would choose in part a. Discuss any differences. f. Based on the solution to (RP) in part e, provide a su'icient condition on buyers' preferences such that the solution to (RP) in part e is indeed a solution to the original problem in part b. Interpret this condition. Is the monopoly better off when this condition holds than when a solution to (RP) is not a solution to the original problem in part b