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Suppose, the Cost of Production of a Widget in Mexico

question 4

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Suppose, the cost of production of a widget in Mexico is 5 pesos.Assume that initially the exchange rate between the peso and the dollar is 2 pesos per dollar.Later, the exchange rate changes to 2.5 pesos per dollar.In the initial situation, a widget sold in the U.S.would be priced at_____; after the change in the exchange rate, the widget would be priced at______ .


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