If the law of one price does not hold, then _____________________.

Question

Quizplus · Accepted Answer

If the law of one price does not hold, it means that the same good or asset is priced differently in different markets, creating an arbitrage opportunity for investors. This means that arbitrageurs can buy in the cheaper market and sell in the more expensive market, generating profits until prices equalize. This process ensures that prices converge and the law of one price holds. Thus, option C is correct. Options A and B are incorrect because they don't logically follow from the given scenario.

If the Law of One Price Does Not Hold, Then