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Question
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.
Answer
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Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies all of the following except that
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B) the relative input prices.
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A) convex towards the origin.
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An expansion path shows
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D) the returns to scale at each level of output.
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B) is equivalent to minimizing cost for a given level of output.
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C) $42,000
D) $41,500
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Which of the following would be categorized as an opportunity cost?
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business
A) a only
B) a and c only
C) b and c only
D) all of the above