Question

type your response in the box.

as you read the following paragraph, think about international trade and currency. then answer the question that follows.

shannon goes on vacation to turkey with her family. wanting to see if pizza is the same in all countries, she and her family go to a franchise pizza restaurant they visit frequently at home. they are astonished that the pizza that costs \\$10 at home costs 50 turkish lira! they discuss why the pizza would cost more money, especially because it tastes almost the same.

what might cause a \\$10 pizza to cost 50 lira in turkey?

Explanation:

Identify the core economic concept

The question asks why a pizza costing $10 in the United States costs 50 Turkish lira in Turkey, despite tasting almost the same. This scenario relates to Global Trade and how different countries use different currencies with distinct values.

Explain exchange rates

The primary reason for the difference in nominal price is the exchange rate between the US Dollar (USD) and the Turkish Lira (TRY). An exchange rate determines how much one currency is worth in terms of another. If 1 USD is worth 5 Turkish lira, then a $10 pizza would naturally cost 50 lira (\(10 \times 5 = 50\)) without representing a difference in the real value or purchasing power.

Consider local economic factors

Beyond the nominal exchange rate, local market conditions can influence prices. Differences in the cost of local inputs (such as labor, rent, ingredients, and taxes) or trade barriers on imported franchise ingredients can cause the real price of the pizza to vary between the two countries.

Answer:

The difference in price is primarily caused by the exchange rate between the US Dollar and the Turkish Lira. Because different countries use different currencies, the nominal value of 50 Turkish lira may simply be equivalent to 10 US dollars based on the international currency exchange market. Additionally, local economic factors in Turkey—such as differing costs for labor, ingredients, rent, and local taxes—can also influence the final price of the pizza.