Which of the following is an example of the law of one price in action?
A) Prices are just one of the many factors that firms use when deciding where to locate production.
B) If one county has a comparative advantage in producing a particular good, another country must have a comparative advantage in producing another good.
C) Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States.
D) Because most industries in the United States are dominated by one or two firms, the dominant firm sets the price and other firms in the industry follow.

Question

Quizplus · Accepted Answer

The law of one price suggests that identical goods should sell for the same price in different locations when there are no transportation costs and no differential taxes applied in the two locations. The movement of call centers to India due to lower wages is an example of this principle, as it leads to wage adjustments that reduce the price differential.

Which of the Following Is an Example of the Law