Consider each of the following goods and services. For each, identify whether the law of one price will hold, and state whether the relative price is greater than, less than, or equal to 1. Explain your answer in terms of the assumptions we make when using the law of one price. a. Wheat traded freely in the United States and Canada.
Consider each of the following goods and services. For each, identify whether the law of one price will hold, and state whether the relative price is greater than, less than, or equal to 1. Explain your answer in terms of the assumptions we make when using the law of one price. a. Wheat traded freely in the United States and Canada.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Consider each of the following goods and services. For each, identify whether the law of one
price will hold, and state whether the relative price is greater than, less than, or equal to 1. Explain your answer in terms of the assumptions we make when using the law of one price.
a. Wheat traded freely in the United States and Canada.
b. Sugar traded in the United States and Mexico; the U.S. government imposes a quota on sugar imports into the United States.
c. Starbucks grande dark roast coffee sold in the United States and Japan.
d. Haircuts in the United States and the United Kingdom.
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