The Law of One Price Is a Useful Theory Only

question 117

Multiple Choice

The law of one price is a useful theory only when applied to:

• A)Long-run periods of time
• B)Domestic markets
• C)Very short-run periods of time
• D)International trade

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Definitions:

Overuse

Refers to the excessive use of a resource to the point where it diminishes its availability or quality.

Common Resource

A resource like air or water that is not owned by anyone, cannot be easily excluded from use, and is available for use by more than one person or group.

Nonexcludable

A characteristic of a good or service that prevents individuals from being effectively excluded from its use or benefits.

Free-rider Problem

A situation in which individuals consume more than their fair share or pay less than their fair share of the cost of a shared resource.