The ________ states that if the costs of transportation are small, the price of the same good in different countries should be roughly the same.

Question

Quizplus · Accepted Answer

The law of one price states that if the costs of transportation are small, the price of the same good in different countries should be roughly the same. This is because if there is a significant difference in price, arbitrage should occur and traders would exploit the opportunity to buy low in one country and sell high in another until the prices converge.

The ________ States That If the Costs of Transportation Are