Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$2.50? Why might the beer actually sell at a different price in the United States?

This does not mean the beer is going to sell at this price in America. There are many other factors that can affect the price, such as transportation costs, taxes, tariffs and the supply/demand dynamic.

If transportation costs are higher to bring Elkhead Beer from Canada to the United States, it might be necessary to adjust selling prices to stay competitive in certain regions or markets. Also, tariffs or import taxes could result in higher prices.

Even though the theory of absolute purchasing-power parity (PPP), based on which goods are supposed to be priced similarly across countries when exchange rate variations have been taken into consideration, many external factors can still influence price decisions.