If a Big Mac Costs $3

question 62

Multiple Choice

If a Big Mac costs $3.41 in the United States and $2.67 in Argentina (the price of a Big Mac in Argentine pesos converted into dollars at the spot exchange rate) , which of the following is most likely true?

• A)The peso is overvalued against the dollar.
• B)The dollar is overvalued against the peso.
• C)It should be harder for a U.S. tourist to buy a leather coat in Buenos Aires because the dollar won't go very far.
• D)It will be cheap for Argentine companies to invest in the United States because the dollar is relatively weak.

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Definitions:

Highly Elastic

Referring to a situation where the quantity demanded or supplied responds significantly to changes in price.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers over a period of time.

Consumer Surplus

The difference between the maximum price consumers are willing to pay and the price they actually pay. It is the net gain derived by the buyers of the good.

Cell-Phone Service

A service provided by telecommunications companies that enables mobile phone users to make and receive calls, texts, and use data.