If a Certain Automotive Part Can Be Purchased in Mexico

question 137

Multiple Choice

If a certain automotive part can be purchased in Mexico for 60 pesos or in the United States for $6.25 and if the nominal exchange rate is 8 pesos per U.S. dollar, then the automotive part:

• A)is less 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.

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Definitions:

Covert Collusion

A secret agreement between firms to fix prices or divide the market to limit competition, which is illegal in many jurisdictions.

Oligopolist

A market participant in an oligopoly, a market structure with a small number of firms dominating the industry.

Cigarette Industry

A sector focused on the manufacturing, marketing, and distribution of cigarettes, often scrutinized for health concerns related to smoking.

Local Water Company

A company responsible for providing water supply and wastewater services to a specific local area or community.