If pepperoni pizzas sell for $10 in Berkeley, California, and £10 in London, England, and the exchange rate is $1.35 = £1,
A) the law of one price has been violated.
B) either the British government or the American government must be interfering with the market determination of the exchange rate.
C) the value of the dollar versus the pound is likely to rise.
D) there is no contradiction in the information given because pizza is not a tradeable good.
D
Economics
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