Which of the Following Is an Example of the Law

question 61

Multiple Choice

Which of the following is an example of the law of one price in action?

• A) Prices are just one of the many factors that firms use when deciding where to locate production.
• B) If one county has a comparative advantage in producing a particular good, another country must have a comparative advantage in producing another good.
• C) Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States.
• D) Because most industries in the United States are dominated by one or two firms, the dominant firm sets the price and other firms in the industry follow.

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Definitions:

Level Of Activity

A measure of the volume of production or work that a business operates at, which can affect costs and efficiency.

Variable Costs

Expenses that vary directly with the amount of production or the degree of business operations.

Fixed Costs

Expenses that do not change with the level of production or sales over a certain period, such as rent or salaries.

Target Net Income

The income objective set by management.