Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries.
-Refer to the above scenario.For 100 francs,how many baskets of goods that cost $1 in the United States can one purchase in country A?
A) 4
B) 10
C) 5
D) 25

Question

Quizplus · Accepted Answer

100 francs can be exchanged for 20 pesos (100 francs / 25 francs per peso = 4 pesos per franc * 20 pesos per basket = 20 pesos). 20 pesos can be used to purchase 4 baskets of goods that cost $1 in the United States (20 pesos / 10 pesos per basket = 2 baskets per dollar * 2 dollars per basket = 4 baskets).

Scenario: the Price of a Standard Basket of Goods in Country