Counter Balance confusion.

Friend played Counter Balance and Rhystic Study.

P1: casts Path to Exile (cost 1) P2: reveals top card (cost 3) - does not counter P1: does not pay 1 mana (could not pay) P2: draws card P2: reveals top card (cost 1) - counters Path to Exile

Is this how this works? Cause I haven't been able to play at all for 4 sessions now.