The morel is a prized mushroom that is often abundant in the Western United States in years after forest fires. Suppose two companies are buying morels from workers willing to find them. One company offers to pay workers $5.00 per pound, and the other company will pay workers only $4.00 per pound. Economists would say that:
A) the company willing to pay only $4.00 has a comparative advantage in selling morels.
B) the higher-paying company will attract the more creative and innovative pickers and the lower-paying company will attract the others.
C) the lower-paying company will attract the more creative and innovative pickers and the higher-paying company will attract the others.
D) this situation violates the law of one price and is not likely to persist.

Question

Quizplus · Accepted Answer

The law of one price suggests that identical goods should sell for the same price in an efficient market. The difference in prices offered by the two companies for the same product (morels) is likely to be temporary as market forces will push towards a single price.

The Morel Is a Prized Mushroom That Is Often Abundant