Question

John wants to buy a new lawn mower. He can either buy it in the US and pay $500 or buy it in Mexico and pay 8188 Mexican Pesos. At the exchange rate of 1 Mexican Peso=0.771US$, ignoring any other costs, he would a. ​Prefer buying in the US b. ​Prefer buying in Mexico c. ​Be indifferent about where he buys his television d. ​None of the above

Answer 1

Answer: a) prefer buying in the US

Explanation: at an exchange rate of 1 peso = 0.771$

Buying in the US will cost him 500$, whereas buying it in Mexico will cost him 8188 pesos which will be equivalent to 8188 x 0.771$ = 6312$

Ignoring any other costs like import, tax etc. John will definitely prefer buying his lawn mower in the US.