Assume that the exchange rate between the Mexican peso and the U.S. dollar is $1 = 18 pesos. Which of the following situations is consistent with the law of one price?

Question

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The law of one price states that in the absence of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency. In option A, $20 in the U.S. is equivalent to 360 pesos in Mexico ($20 * 18 pesos/$ = 360 pesos), which is consistent with the law of one price.

Assume That the Exchange Rate Between the Mexican Peso and the U.S