Final answer:
Using the Law of One Price and an exchange rate of 1.5620 USD/GBP, a 50 GBP Pierre Cardin T-shirt in the UK equates to 78.10 USD in the US. The LOP dictates price uniformity, adjusted for currency exchange rates, across different markets for identical goods.
Step-by-step explanation:
The question relates to the concept of the Law of One Price (LOP) and its application in the context of foreign exchange rates and purchasing power parity. The Law of One Price asserts that in the absence of transaction costs and barriers to trade, identical goods should have the same price when expressed in a common currency. Applying the LOP and the given exchange rate of 1.5620 USD/GBP, we can determine the price of a Pierre Cardin T-shirt in the US. The T-shirt costs 50 GBP in the UK, so we multiply 50 GBP by the exchange rate (1.5620 USD/GBP) to obtain the price in US dollars.
Calculation:
50 GBP * 1.5620 USD/GBP = 78.10 USD
Therefore, according to the Law of One Price, the price of the Pierre Cardin T-shirt in the US should be 78.10 USD. This price conversion leverages exchange rates to facilitate a comparison of prices across countries, ensuring that a specific good maintains uniformity in value regardless of currency. The LOP underlies much of international trade and investment strategies, such as those considered by international investors anticipating exchange rate movements between the British pound and the US dollar. Appreciation and depreciation of currencies can affect the purchasing power and the investment returns respectively.