If a certain automotive part can be purchased in Mexico for 32 pesos or in the United States for $5.25, and if the nominal exchange rate is 8 pesos per U.S. dollar, then the automotive part:
A)is more expensive in Mexico.
B)is more expensive in the United States.
C)is less expensive in the United States.
D)costs the same in Mexico and the United States.

Question

Quizplus · Accepted Answer

The automotive part is more expensive in the United States. This is because one dollar buys 8 pesos and 4 dollars buys 32 pesos, so the part could be purchased for $4 in Mexico versus $5.25 in the United States.

If a Certain Automotive Part Can Be Purchased in Mexico