When the law of one price is violated in that the same good is selling for two different prices, an opportunity for what type of transaction is created?
A) return-to-equilibrium transaction
B) risk-assuming transaction
C) speculative transaction
D) arbitrage transaction
E) none of the above

Question

Quizplus · Accepted Answer

The violation of the law of one price creates an opportunity for an arbitrage transaction. This involves buying the good at the lower price and selling at the higher price, thus profiting from the price difference. This process helps to bring the prices back in line with each other, restoring the law of one price.

When the Law of One Price Is Violated in That