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

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.

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