Final answer:
The nematode C. elegans achieves dosage compensation by equalizing X-linked gene expression between XO males and XX hermaphrodites, not by inactivation but by reducing expression on both X chromosomes in hermaphrodites.
Step-by-step explanation:
The species that achieves dosage compensation by decreasing the level of expression on both X chromosomes in XX hermaphrodites to 50% relative to the single X of XO males is the nematode C. elegans. Unlike in mammals, where dosage compensation is achieved through X inactivation, resulting in the formation of a Barr body, C. elegans utilizes a different mechanism to balance the expression of X-linked genes between the sexes. This ensures that both XO males and XX hermaphrodites have equivalent levels of gene expression from their X chromosome(s), despite the difference in the number of these chromosomes.