Answer: The Law of One Price
Explanation:
In the movie, Other People's Money, Danny DeVito plays Lawrence “Larry the Liquidator” Garfield who wanted to buy New England Wire and Cable because it was in such a good position financially and sell it for more than it was worth at the time to make profit.
This move would violate the Law of One Price because the law states that a good should be sold at the same price regardless of location or status.
If the company sells at a higher price when it is dead as opposed to when still operational, that means that it is selling at different prices. For it not to violate the Law of One Price it needs to be worth the same alive and operational as it is dead and to be sold off.
The economic principle violated by Larry Garfield in his attempt to gain control of the New England Wire and Cable, breaking it up to sell the assets and make a profit is e. The law of one price.
If arbitrage opportunities are eliminated from the transaction, Larry would not be able to make a profit by breaking up the assets of the company because they would fetch the same price when the company is sold as a whole.
Answer Choices:
a. Diminishing marginal return
b. Diminishing marginal utility of wealth
c. Non-positive marginal utility of wealth
d. Externalities
e. The law of one price
Thus, the economic principle violated with Larry Garfield's attempt was e. The law of one price.
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