The law of one price states that:
A) a good must sell at the price fixed by law
B) a good cannot sell for a price greater than the legal price ceiling
C) domestic producers of a good are guaranteed a subsidy by law
D) a good must sell at the same price at all locations

Question

Quizplus · Accepted Answer

The law of one price states that a good must sell at the same price at all locations. This is because if a good is selling for a higher price in one location, consumers can simply purchase the good from a different location where it is selling for a lower price, and resell it in the higher-priced location, capturing the difference as profit. This process of arbitrage will eventually lead to the price of the good becoming the same across all locations.

The Law of One Price States That