The _________ states that in competitive markets free 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.
A)law of one price
B)principle of consistent pricing
C)model of fair pricing
D)principle of equitable pricing

Question

Quizplus · Accepted Answer

The law of one price states that in a competitive market with free trade and no transportation costs, identical products sold in different countries should have the same price when the price is expressed in terms of the same currency. This principle suggests that exchange rates between currencies should adjust to reflect price differentials across countries. If the same product sells at different prices in two different countries, there are opportunities for arbitrage, or taking advantage of price differentials to make a profit. Therefore, the law of one price helps to explain the relationship between exchange rates and the prices of goods and services traded internationally.

The _________ States That in Competitive Markets Free of Transportation