Answer: c. It is overvalued and should lose value against the U.S. dollar over time.
Step-by-step explanation:
The Purchasing power parity states that prices should be the same in two countries when the price is adjusted for changes in exchange rate.
The exchange rate here is $1 so the prices should be the same.
Seeing as the prices are not the same, the exchange country that has the more expensive price will have to decrease in value overtime because its currency is overvalued which is why it is charging so high.
Once the value depreciates, it will then have the same price as the price in the U.S. when the price is adjusted for exchange rate differences.