Peso Depreciation Halves US Dollar Price

Steps:

• Initial peso price: $50 × 5 pesos/$ = 250 pesos.
• Exchange rate shifts to 10 pesos/$1, doubling pesos per dollar.
• Peso price stays fixed at 250 pesos.
• New US price: 250 pesos ÷ 10 pesos/$=$25.

Why B is correct:

• Exchange rate formula (pesos price / pesos per dollar) shows depreciation doubles supply of pesos per dollar, halving dollar value for fixed peso cost.

Why the others are wrong:

• A: $5 understates by factor of 5, ignoring initial$50 base.
• C: $$, reversing actual change.

Final answer: B