The Following Two Graphs Depict the Equilibrium Price of a Pound

question 149

Multiple Choice

The following two graphs depict the equilibrium price of a pound of flax seed in Kentucky and West Virginia, respectively. Assume the type and quality of the flax seed being sold in the two states are identical. Further, assume flax seed sellers incur zero costs to transport flax seed between the two states and that there are no other barriers to trade. Use these graphs to answer the next questions.

-Suppose the price of a pound of flax seed in West Virginia is currently $1.00. The law of one price suggests that because the price of a pound of flax seed is $1.20 in Kentucky, the price of a pound of flax seed will be ________ in West Virginia after sellers adjust their supplies in both markets.

• A) $1.20
• B) $1.00
• C) $0.80
• D) between $1.20 and $1.00
• E) between $1.00 and $0.80

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Definitions:

Abolished Slavery

The act of formally ending the practice of enslaving people, making it illegal to own slaves.

North American Continent

A vast geographical region comprising the countries of Canada, the United States, Mexico, and the nations of Central America, among others.

Largest Battle

Typically refers to a military engagement with the largest number of combatants or casualties; can vary based on context and historical period.

Labor System

An organizational scheme for the division of work and allocation of workers to tasks, characterized by various forms including slavery, serfdom, wage labor, and others, depending on the historical and cultural context.