When the Law of One Price Is Violated in That

question 36

Multiple Choice

When the law of one price is violated in that the same good is selling for two different prices, an opportunity for what type of transaction is created?

• A) return-to-equilibrium transaction
• B) risk-assuming transaction
• C) speculative transaction
• D) arbitrage transaction
• E) none of the above

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Definitions:

FIFO

"First-In, First-Out," an inventory valuation method where the cost of goods sold is based on the oldest inventory items.

Lower Of Cost

Lower of Cost or Market (LCM) is an accounting principle that values inventory at the lower of its historical cost or current market value.

Inventory Value

The total cost or market value of all the goods and materials held by a company for the purpose of resale or production.

Market Decline

A decrease in the overall value of a market, evidenced by falling asset prices and often associated with economic downturns.