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A Roll of Duct Tape Costs 2 Canadian Dollars in Canada

Question 325

Multiple Choice

A roll of duct tape costs 2 Canadian dollars in Canada and 1.75 U.S. dollars in the U.S. If the nominal exchange rate were 1.10 Canadian dollars per U.S. dollar.

A) A profit could be made by buying duct tape in Canada and selling it in the U.S. This would tend to drive up the price of U.S. duct tape.
B) A profit could be made by buying duct tape in Canada and selling it in the U.S. This would tend to drive up the price of Canadian duct tape.
C) A profit could be made by buying duct tape in the U.S. and selling it in Canada. This would tend to drive up the price of U.S. duct tape.
D) A profit could be made by buying duct tape in the U.S. and selling it in Canada. This would tend to drive up the price of Canadian duct tape.

Correct Answer: