What is the Law of One Price?


Buying and selling a good simultaneously in two different venues, referred to as arbitrage, unifies a market and brings about a single equilibrium price or price differences that just cover the cost of transacting. This tendency is called the Law of One Price.

Economics

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When the interest rate on a bond is above the equilibrium interest rate, in the bond market there is excess ________ and the interest rate will ________

A) demand; rise B) demand; fall C) supply; fall D) supply; rise

Economics

Which of the following is true about the demand curve facing the dominant firm?

A) It equals market demand minus fringe firms' supply curve. B) It is identical to market demand. C) It equals market demand minus demand facing the fringe firms. D) It is horizontal.

Economics

Which of the following occurs if firms are able to restrict output and raise price?

a. resources are misallocated b. wealth is shifted from consumers to government c. wealth is shifted from producers to consumers d. P = MC e. P = minimum LRAC

Economics

Which of the following is true of a tariff?

a. It is a tax levied by the government on domestic production of goods and services. b. It is a quantitative restriction on imports imposed by the government. c. It is a monetary benefit received by exporters from the government. d. It is a monetary benefit received by importers from the government. e. It is a tax on import and export levied by the government.

Economics