Consider the following information about prices: P = $150; EP*= $180. If the cost of transporting the product is $15, based on this information:
A) it is possible to engage in arbitrage.
B) it is not possible to engage in arbitrage.
C) it is inconclusive whether arbitrage is possible.
D) arbitrage is possible only if transportation cost is $1.

Question

Quizplus · Accepted Answer

Arbitrage is possible because the price difference between the two markets ($30) is greater than the transportation cost ($15), allowing for profit.

Consider the Following Information About Prices: P = $150; EP*=