If a typical firm in a perfectly competitive industry is incurring losses, then o some firms will exit in the long run, causing market supply to decrease an d market price to rise increasing profits for the remaining firms o all firms will continue to lose money o some firm s will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms. some firms wi firms. ll exit in the long run, causing market supply to decrease and market price to all increasing losses for the remaining question 18 if a typical monopolistically competitive firm is making short-run losses, then o the industry will eventually cease to exist o as some firms leave, the remaining firms ill experience an increase in the demand for their products he demand for the products of the remaining firms will become more elastic o other more competitive firms will enter the market.

The east asiatic company (eac), a danish company with subsidiaries throughout asia, has been funding its bangkok subsidiary primarily with u. s. dollar debt because of the cost and availability of dollar capital as opposed to thai baht-denominated (b) debt. the treasurer of eac-thailand is considering a 1-year bank loan for $247,000.the current spot rate is b32.03 /$, and the dollar-based interest is 6.78% for the 1-year period. 1-year loans are 12.04% in baht. a. assuming expected inflation rates of 4.3 % and 1.24% in thailand and the united states, respectively, for the coming year, according to purchase power parity, what would the effective cost of funds be in thai baht terms? b. if eac's foreign exchange advisers believe strongly that the thai government wants to push the value of the baht down against the dollar by5% over the coming year (to promote its export competitiveness in dollar markets), what might the effective cost of funds end up being in baht terms? c. if eac could borrow thai baht at 13% per annum, would this be cheaper than either part (a) or part (b) above?