The law of one price states that:
The nominal exchange rates should always be the same as the realexchange rates, both in the short run and in the long run
In ideally efficient markets, the real purchasing power of acurrency should be the same regardless of where it is spent
The cost of an individual good should be higher in countrieswith higher productivity
Which of the following scenarios illustrates why the law of oneprice may not hold? Check all that apply.
The formation of the European Union creates a custom union amongits member states, where internally traded goods are not subject tocustom duties, tariffs, or import quotas.
Small electronic devices, such as computer chips, are relativelylight and can be shipped in bulk.
Cement is very heavy, and the cost of shipping is measured byweight.
