Question

In the story of New England Wire and Cable, the company was in an unusual situation of being worth more dead than alive. What economic principle was violated when Larry Garfield tried to get control of the firm, break it up, sell the assets, and make a profit

Answer 1

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.