According to a New York Times article, shoppers from New York City have played a game of "retail arbitrage" by shopping at malls in Northern New Jersey, a state where there is no tax on clothing and shoes. Even after accounting for transaction costs, shoppers could still save money on their clothing and footwear purchases. Source: Ken Belson and Nate Schweber, "Sales Tax Cut in City May Dim Allure of Stores Across Hudson," New York Times, January 18, 2007.
Is the term "arbitrage" correctly used here?
A) Yes, because shoppers were able to purchase items at lower prices even after deducting their transaction costs.
B) No, "arbitrage" means buying at a low price and reselling at a higher price, but no resale takes place here.
C) Yes, arbitrage applies even if no resale takes place; in this case the profits are pocketed by the customers themselves.
D) No, "arbitrage" does not apply to markets that are not in the same geographic area.

Question

Quizplus · Accepted Answer

The term "arbitrage" typically involves buying and reselling to profit from price differences, which is not the case here as there is no resale involved.

According to a New York Times Article, Shoppers from New