The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-If a bushel of corn sells for $2 in the United States and for 4,000 COP (Colombian peso) in Colombia, and if 1 dollar is worth 2,200 COP, then:
A)the corn is 400 COP more expensive in Colombia.
B)the corn is 400 COP cheaper in Colombia.
C)the price of a bushel of corn equals $2 in both the United States and Colombia.
D)the price of corn is 4,000 COP lower in Colombia than in the United States.
E)the price of corn is $0.20 lower in the United States than in Colombia.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-If a bushel of corn sells for $2 in the United States and for 4,000 COP (Colombian peso) in Colombia, and if 1 dollar is worth 2,200 COP, then:
A)the corn is 400 COP more expensive in Colombia. 
B)the corn is 400 COP cheaper in Colombia. 
C)the price of a bushel of corn equals $2 in both the United States and Colombia. 
D)the price of corn is 4,000 COP lower in Colombia than in the United States. 
E)the price of corn is $0.20 lower in the United States than in Colombia.

Quizplus · Accepted Answer

To compare the prices of corn in the United States and Colombia, we need to convert the price in Colombia from COP to USD. 
Price of corn in Colombia = 4,000 COP = 4,000/2,200 USD = 1.82 USD
Since the price of corn in the United States is $2 and the price of corn in Colombia is 1.82 USD, we can see that corn is cheaper in Colombia by 0.18 USD or 400 COP (since 1 USD = 2,200 COP). Therefore, the correct answer is B, the corn is 400 COP cheaper in Colombia.

The Figure Given Below Depicts the Foreign Exchange Market for British