Suppose the Only Good Traded Between Mexico, the U

question 60

Multiple Choice

Suppose the only good traded between Mexico, the U.S., and Brazil is beef, which is produced by all three countries. If the cost of producing a pound of beef is 5 pesos in Mexico, 2 dollars in the U.S., and 1 real in Brazil, the exchange rates based on the law of one price would be______ pesos per dollar and_____ dollars per real.

• A)2.5; 2
• B)2.5; 0.5
• C)0.4; 0.5
• D)0.4; 2

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