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Suppose the Same Automobile Is Produced by a Multinational Firm

Question 42

Multiple Choice

Suppose the same automobile is produced by a multinational firm in the US and Europe. The price of the car is $12,500 in the US or €25,000 in Europe,and there are no transport costs or tariffs. Then according to the law of one price,the value of the dollar in terms of the euro should be


A) ½
B) 1
C) 2
D) 2.5
E) 4

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