Which of the following statements regarding the Law of One Price is most accurate?
A)At any point in time,the price of two equivalent goods trading in different competitive markets is expected to be different.
B)One consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value (NPV),we must check the price in all possible markets.
C)If equivalent goods or securities trade simultaneously in different competitive markets,then they will trade for the same price in both markets.
D)An important property of the Law of One Price is that it holds even in markets where arbitrage is not possible.
E)Different goods trading simultaneously in the same competitive market will trade for different prices.

Question

Quizplus · Accepted Answer

The Law of One Price states that if equivalent goods or securities trade simultaneously in different competitive markets, then they will trade for the same price in both markets. This concept is based on the assumption that buyers and sellers have access to all relevant information and can easily move between markets, eliminating any opportunities for arbitrage profits. Option A is incorrect because the Law of One Price suggests that equivalent goods should trade at the same price in different markets. Option B is incorrect because while checking prices in different markets may be necessary to evaluate costs and benefits, it is not a consequence of the Law of One Price. Option D is incorrect because the Law of One Price requires the possibility of arbitrage for it to hold. Option E is incorrect because the Law of One Price applies to equivalent goods or securities, not different goods.

Which of the Following Statements Regarding the Law of One