Chance for arbitrage, Normal 0 false false false EN-IN X-NONE

Chance for arbitrage

Assume the price of unleaded regular octane gasoline were 20 cents per gallon higher in New Jersey than in Oklahoma. Do you think there would be chance for arbitrage (that means. that firms could buy gas in Oklahoma and then sell it at profit in New Jersey)? Why or why not?

Oklahoma and New Jersey stand for separate geographic markets for gasoline due to high transportation costs. If transportation costs were zero, a price raise in New Jersey would prompt arbitrageurs to buy gasoline in Oklahoma and sell it in New Jersey. In this case it is unlikely that the 20 cents per gallon difference in costs would be high sufficient to create a profitable opportunity for arbitrage, given both transactions costs & transportation costs.

View Complete Question

Related Questions in Microeconomics

Q : Law of Diminishing marginal utility

Describe the Law of Diminishing marginal utility? Answer: Law of Diminishing marginal utility: As a consumer goes on consuming more and more units of a commodity th

Q : Profit Maximization in the Labor Markets

I have a problem in economics on Profit Maximization in the Labor Markets. Please help me in the following question. All the profit maximizing firms will hire labor up to a point where: (1) MRP = MFC. (2) MRP = w. (3) VMP = w. (4) VMP = MFC.

Q : Substitution effects resulting from

The Law of Demand mainly relies heavily on the: (1) Buying power consequences of relative price modifications. (2) Substitution effect resultant from the relative price changes. (3) Increase in opportunity costs as income is worn out. (4) Principle of the non satiety.

Q : Numerical question regarding demand At

At $1.50 per gallon, Alana purchases 50 gallons of gasoline weekly, Bart purchases 20 gallons weekly, and Caitlin purchases 20 gallons weekly. One point on their joint demand curve for gasoline would be Q =: (1) 90 gallons per week, P = $1.50. (2) 90 gallons per week,

Q : Explicit Costs of business The Explicit

The Explicit costs of doing the business would comprise: (i) The value of owner’s time (ii) Depreciation on the company owned truck (iii) The interest that the owner could earn when her savings were not tied up in firm. (iv) Salaries paid to the

Q : Question related to Gross domestic

Proprietors' income $ 20, Compensation of employees 300, Consumption of fixed capital 15, Gross investment 80, Rents 10, Interest 20 ,Exports 30, Imports 50, Corporate profits 25, Taxes on production and imports 5 ,Net foreign factor income 0 ,Statistical discrepancy

Q : Holding less liquid assets in investment

When households become more willing to hold less liquid assets, in that case the: (w) interest rate rises. (x) present value of future income falls. (y) interest rate falls. (z) stock market will crash. I need a go

Q : Condition for long-run equilibrium

Which of the given is NOT a condition for long-run equilibrium into a purely competitive market: (w) P = MC (x) MR = MC (y) P = LRAC (z) TFC = TC Can anybody suggest me the proper explanation for given problem rega

Q : Decreasing price of Complementary Goods

The increase in demand for tartar sauce would be a probable result of: (1) A reduction in the price of fish. (2) An raise in the price of tartar sauce. (3) A bumper crop of the tartar sauce. (4) A raise in the price of fish. (v) The reduction in price

Q : Economic profit generating purely

In this illustrated figure in below the only purely competitive firm currently generating economic profit is in: (w) Firm A. (x) Firm B. (y) Firm C. (z) Firm D.

Discover Q & A

Leading Solution Library

Avail More Than 1417403 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads

No hassle, Instant Access

Start Discovering

18,76,764

1959792
Asked

3,689

Active Tutors

1417403

Questions
Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment