Macroeconomics 8th Edition by David Colander

Exercise 6

One of the basic laws of economics is the law of one price. It says that given certain assumptions one would expect that if free trade is allowed, the prices of goods in multiple countries should converge. This law underlies purchasing power parity.
a. What are the three assumptions likely to be?
b. Should the law of one price hold for labor also? Why or why not?
c. Should it hold for capital more so or less so than for labor? Why or why not?