For which of the following goods would the law of one price most likely hold?
A) milk in Seattle, Washington and milk in Portland, Oregon
B) energy in Sacramento, California and energy in New Orleans, Louisiana
C) subway rides in New York, New York and subway rides in Toronto, Ontario
D) clothing in Bangor, Maine and clothing in Los Angeles, California
E) shoes in Vancouver, British Columbia and shoes in Miami, Florida

Question

Quizplus · Accepted Answer

The law of one price is most likely to hold for goods that are homogeneous and have low transportation costs relative to their value, making milk in Seattle, Washington, and Portland, Oregon, the best fit. These cities are geographically close, reducing transportation costs and making the market for milk more integrated.

For Which of the Following Goods Would the Law of One