Which of the Following Statements Regarding the Law of One

question 11

Multiple Choice

Which of the following statements regarding the Law of One Price is INCORRECT?

• A)At any point in time,the price of two equivalent goods trading in different competitive markets will be the same.
• B)One useful consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value,we can use any competitive price to determine a cash value,without checking the price in all possible markets.
• C)If equivalent goods or securities trade simultaneously in different competitive markets,then they will trade for the same price in both markets.
• D)An important property of the Law of One Price is that it holds even in markets where arbitrage is not possible.

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Definitions:

MPP

Marginal Physical Product, the additional output resulting from the use of one more unit of a variable input, holding all other inputs constant.

MRP

Marginal Revenue Product; the additional revenue generated from employing one more unit of a resource or factor of production.

Substitution Effect

The change in demand for a good or service that occurs when its price increases or decreases, leading consumers to substitute it with other goods or services that are relatively more or less expensive.

Output Effect

The impact on the total production of goods and services in an economy resulting from changes in demand, supply, technology, or factors of production.