Which of the following statements is the MOST accurate?
The law of one price states
A) in competitive markets free of transportation costs and official barriers to trade, identical goods sold in different countries must sell for the same price when their prices are expressed in terms of the same currency.
B) in competitive markets free of transportation costs and official barriers to trade, identical goods sold in the same country must sell for the same price when their prices are expressed in terms of the same currency.
C) in competitive markets free of transportation costs and official barriers to trade, identical goods sold in different countries must sell for the same price.
D) identical goods sold in different countries must sell for the same price when their prices are expressed in terms of the same currency.
E) in competitive markets free of official barriers to trade, identical goods are sold at the same price regardless of transportation costs.

Question

Quizplus · Accepted Answer

The law of one price refers to the idea that identical goods should sell for the same price in competitive markets that are free of transportation costs and official trade barriers when expressed in the same currency. This means that if there are two identical products sold in two different countries and the exchange rate is taken into account, they should sell for the same price after conversion. Therefore, option A is the most accurate statement about the law of one price.

Which of the Following Statements Is the MOST Accurate