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A woven-leather chair costs $570 in the United States. If the exchange rate between U.S. dollars and Mexican pesos is $0.06 per peso, how much should the same chair cost in Mexico? Assume that purchasing power parity holds perfectly in this case.

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pedrocarratore

Answer:

9,500 pesos.

Explanation:

Cost in dollars = $570

Exchange rate = $0.06 per peso

Assuming a perfect purchasing power parity, a straight-forward currency conversion from dollars to pesos should yield the cost of the woven-leather chair in Mexico.

Therefore, the cost of the woven-leather chair, in Mexico, is:

[tex]C= \$570*\frac{1\ peso}{\$0.06} \\C=9,500\  pesos[/tex]

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