According to the law of one price, which good or service is likely to have a larger price difference in different countries?单项选择题
A
land
B
tennis shoes
C
butter
D
bubble gum

Question

According to the law of one price, which good or service is likely to have a larger price difference in different countries?

BlackTom AI · Accepted Answer

Land is immobile internationally, so its price is determined locally and can differ greatly across countries and locations.

1) Relevant concepts: The law of one price states that identical tradable goods should sell for the same price across markets when expressed in a common currency, assuming no transport costs, tariffs, or other frictions. Key conditions are tradability, homogeneity, low transaction/transport costs, and ease of arbitrage. Non-tradable or location-specific goods violate these conditions and can have large cross-country price differences. Related is purchasing power parity (PPP) for general price levels and the distinction between tradable and non-tradable goods.

2) Step-by-step reasoning:
- Step 1: Check tradability/homogeneity. Tennis shoes and bubble gum are manufactured, standardized products and are easily shipped; they are tradable and subject to international competition. Butter is perishable but still widely traded and processed; international markets and refrigeration reduce price dispersion relative to non-tradables.
- Step 2: Identify frictions. Manufactured goods face relatively low transport costs and are often subject to global brands and arbitrage, so price gaps are smaller. Butter can face some trade barriers and transport costs, but it remains tradable.
- Step 3: Evaluate land. Land cannot be exported or arbitraged across borders. Its supply is location-specific and fixed; prices reflect local demand, zoning, amenities, taxes, and institutions. This produces large, persistent price differences across countries and even within a country.

3) Intermediate logical steps (no numerical calculation required): Because land fails the tradability and arbitrage conditions of the law of one price, while the other goods largely meet them, land will exhibit the largest international price dispersion.

4) Why the correct answer is correct: Land is non-tradable, location-specific, and influenced by local regulations and amenities, so the law of one price does not apply and price differences across countries are large.

5) Why other options are incorrect: Tennis shoes and bubble gum are standardized, easy to ship, and internationally traded; butter, though perishable, is still traded globally and less subject to extreme local pricing than land.

Conclusion: Therefore, land is the good most likely to have a larger price difference across countries, which matches the provided answer: land.

According to the law of one price, which good or service is likely to have a larger price difference in different countries?单项选择题

类似问题