Question

Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of

goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000

pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries.

Refer to the above scenario. For 100 francs, how many baskets of goods that cost $1 in the United States

can one purchase in country A?

A) 4

B) 10

C) 5

D) 25

Answer 1

Answer : The answer is option A.

Based on given information, in country A one can purchase 1 basket of goods for 10 pesos and in country B one can purchase 1 basket of goods for 25 francs. This means that, 10 pesos = 25 francs. So,

25 francs = 10 pesos

=> 1 franc = 10 / 25 pesos

=> 100 francs = (10 / 25) * 100) = 40 pesos.

For 10 pesos one can purchase 1 basket of goods

For 1 pesos one cam purchase = 1 / 10 basket of goods.

For 40 pesos one can purchase = (1 / 10) * 40 = 4 basket of goods.

Therefore, for 100 francs one can purchase 4 basket of goods in country A. So, option A is correct.