The law of one price states that if transportation costs are relatively small, then the:
A. nominal exchange rate for a currency must equal the real exchange rate for that currency.
B. nominal exchange rates for every country's currency must be equal.
C. price of an internationally traded commodity must be the same in all locations.
D. producer with the lowest opportunity cost should be the only producer any commodity.
Answer: C
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Assume that there are two nations, Alpha and Beta. Each nation produces two products, wheat and steel. Alpha has a comparative advantage in the production of wheat. If the two nations trade, the trade price of wheat in terms of steel will be
A. greater than the domestic opportunity cost of wheat in both nations. B. less than the domestic opportunity cost of wheat in both nations. C. less than the domestic opportunity cost of wheat in Alpha and greater than the domestic opportunity cost of wheat in Beta. D. greater than the domestic opportunity cost of wheat in Alpha and less than the domestic opportunity cost of wheat in Beta.
Table 7-5 Stereos produced 0 1 2 3 4 5 6 Total cost (in $) 200 325 410 475 550 660 825 Table 7-5 shows short-run total cost figures for a stereo manufacturer. At what output level does short-run average total cost reach a minimum?
A. 2 B. 3 C. 4 D. 5
The reason the production possibilities curve is bowed outward (concave) is
A) the law of increasing additional cost. B) that technology is constantly changing. C) that the number of resources is increasing. D) that the economy has more capital goods than entrepreneurial effort.
Utility theory assumes that marginal utility:
a. increases as an individual consumes more of a product. b. decreases as an individual consumes more of a product. c. is zero as long as the individual derives utility from the product. d. is constant as long as the individual derives utility from the product. e. is constant as long as the individual derives satisfaction from the product.