Consider a Situation of Two Cities Linked by a Government-Subsidized

question 38

Multiple Choice

Consider a situation of two cities linked by a government-subsidized railway that effectively makes transportation free.In one city,there is high demand for fish and chips.In another city,fish and chips is considered unfashionable and is rarely eaten.Regardless of the difference in demand,the price for fish and chips is the same in both cities.This can be explained by what concept?

• A) exchange rate manipulation
• B) identical supply
• C) the law of one price
• D) variable inflation
• E) fixed exchange rates

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Definitions:

Stock Price

The cost of purchasing one share of a company, which fluctuates based on market conditions and perceived value.

Upper Bound

The highest value that a particular parameter can assume, often used in the context of optimization and approximation problems.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price on or before a specified date.

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership of the company.