Of the following is true of the theory of purchasing power parity (PPP)? It suggests that the price for identical products sold in different countries should be controlled purely by the supply and demand of those goods. It increases the disparity of prices for identical products from different countries. It suggests that in the long run, exchange rates should move toward levels that would equalize the prices of an identical basket of goods in any two countries. It encourages traders to buy low and sell high, eventually driving different prices for identical products to the same level around the world.

Magic realm, inc., has developed a new fantasy board game. the company sold 15,000 games last year at a selling price of $20 per game. fixed expenses associated with the game total $182,000 per year, and variable expenses are $6 per game. production of the game is entrusted to a printing contractor. variable expenses consist mostly of payments to this contractor.required: 1-a. prepare a contribution format income statement for the game last year.1-b. compute the degree of operating leverage.2. management is confident that the company can sell 58,880 games next year (an increase of 12,880 games, or 28%, over last year). given this assumption: a. what is the expected percentage increase in net operating income for next year? b. what is the expected amount of net operating income for next year? (do not prepare an income statement; use the degree of operating leverage to compute your answer.)