Final answer:
The inability to determine the ultimate price of a product when a company exports it from the United States to another country can occur when the domestic price levels in the United States are higher compared to price levels in other countries. This is known as the foreign price effect.
Step-by-step explanation:
The inability to determine the ultimate price of a product when a company exports it from the United States to another country can occur when the domestic price levels in the United States are higher compared to price levels in other countries. This is known as the foreign price effect. When prices rise in the United States but remain fixed in other countries, U.S. exports become relatively more expensive, causing the quantity of exports sold to decrease. In contrast, U.S. imports from abroad become relatively cheaper, leading to an increase in the quantity of imports.
This effect is influenced by the exchange rate of the dollar in terms of foreign currency. The demand for U.S. exports depends on the price of those exports, which is determined by the dollar price of the goods and the exchange rate. When the exchange rate is unfavorable, it can further contribute to the difficulty in determining the ultimate price of the exported product.
For example, if a Ford pickup truck costs $25,000 in the United States, and the exchange rate between the U.S. dollar and British pound is $1.30 per pound, the price of the truck in the United Kingdom would be £19,231 ($25,000 / $1.30). However, if the exchange rate changes, the ultimate price of the truck in the United Kingdom would fluctuate accordingly.