20. Suppose that a Big Mac costs $3 in the United States and NT$120 in Taiwan, and the exchange rate is NT$30 per U.S. dollar. According to purchasing power parity (PPP), (A) The U.S. dollar will depreciate against the New Taiwan dollar. (B) The U.S. dollar will appreciate against the New Taiwan dollar. (C) The exchange rate will remain unchanged. (D) Any of the above is possible.

1. Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do? (A) He should sell the car now for $3800. (B) He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200. (C) He should complete the additional work and sell the car for $6200. (D) It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.

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