Asked by Joseph Hasson on May 05, 2024
Verified
The "law of one price" states that
A) a good must sell at the price fixed by law.
B) a good must sell at the same price at all locations.
C) a good cannot sell for a price greater than the legal price ceiling.
D) nominal exchange rates will not vary.
Price Ceiling
A legal maximum on the price at which a good can be sold.
Law of One Price
The economic theory that states that in efficient markets, identical goods should have only one price.
Exchange Rates
The value of one currency for the purpose of conversion to another, indicating how much of one currency can be exchanged for another currency.
- Comprehend the fundamentals of the law of one price and its application in the context of global economics.
Verified Answer
BS
brittany searsMay 08, 2024
Final Answer :
B
Explanation :
The "law of one price" asserts that in the absence of transportation costs and barriers to trade (like tariffs), a good should sell for the same price in all locations. This principle underlies the concept of purchasing power parity in international economics.
Learning Objectives
- Comprehend the fundamentals of the law of one price and its application in the context of global economics.