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If Goods Are Nontradable, Like Haircuts

Question 28

Multiple Choice

If goods are nontradable, like haircuts:


A) the law of one price does not hold because there are no arbitrage possibilities.
B) the law of one price does not hold because all goods are different.
C) the law of one price holds.
D) exchange rate changes have a bigger impact on the price than if goods are tradable.
E) haircuts are tradable.

Correct Answer:

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