In theory, the law of one price makes a lot of sense. So why do we see it fail so often?
What will be an ideal response?
The law of one price fails often because in many cases countries will place tariffs on imports. Also many products do not trade or ship easily, for example concrete. As a result, they can have significantly different prices across markets and countries. Also there can be technical differences in products; many home appliances would have to be re-wired to be used in other countries. Finally, many services simply do not transport well, for example haircuts and restaurant meals.
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Consider a competitive industry and a price-taking firm that produces in that industry. The market demand and supply functions are estimated to be: Demand: Qd = 10,000 ? 10,000P + 1.0MSupply: Qs = 80,000 + 10,000P ? 4,000PIwhere Q is quantity, P is the price of the product, M is income, and PI is the input price. The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and PI for 2015:
= $50,000 and 
I = $20The manager also estimates the average variable cost function to beAVC = 3.0 ?
0.0027Q + 0.0000009Q2Total fixed costs will be $2,000 in 2015. The minimum value of average variable cost is ________. A. $2.15 B. $0.50 C. $1.00 D. $0.75 E. $0.975
Use the figure below to answer the following question. 
The case of substitute goods is represented by figure
A. 1. B. 2. C. 3. D. 4.
If a product is a normal good, an increase in your income will
A) increase demand for the product. B) decrease demand for the product. C) increase supply of the product. D) decrease supply of the product.
According to ________, entrepreneurship does not contribute anything of value to production
A) Milton Friedman B) Karl Marx C) Robert Lucas and Thomas Sargent D) John Maynard Keynes