--%>
Assignment Help - homework help

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.

   Related Questions in Microeconomics

  • Q : Labor Unions and Wage Differentials The

    The counter-argument to the idea which unions cause inflation is that the union negotiated wage hikes: (i) Are not excessive except W > average revenue products. (ii) Set the pattern for non-union wage negotiations. (iii) Tend to outcome in lower salaries in non-un

    		•
  • Q : Market demand in short run purely

    Ceteris paribus, inside the short run an increase into the market demand for this product would permit this purely competitive firm to be: (w) make only normal profits. (x) break even. (y) make economic profits, although not in the long run. (z) compe

    		•
  • Q : Probability of Law of Diminishing

    Can someone help me in finding out the right answer from the given options. Karina gets 27 utils from her first ice-cream cone in an hour, and 23 extra utils from the second that hour. Determine the number of utils is she likely to obtain from the third cone? (i) 15 u

    		•
  • Q : Influence on the total cost of plans of

    For a negative income tax the break-even level of income plan (NIT) is: (1) negatively related to the plan’s basic income floor. (2) positively related to the negative income tax rate. (3) a main influence on the total cost of t

    		•
  • Q : Various kinds of capital goods Supply

    Supply curves for different kinds of capital goods are usually: (w) perfectly elastic. (x) perfectly inelastic. (y) upward sloping. (z) downward sloping. Can anybody suggest me the proper explanati

    		•
  • Q : Reduced monopoly power by oligopolistic

    The allocative inefficiency commonly related with the exercise of market [i.e., monopoly] power tends to be reduced when oligopolistic firms: (1) differentiate their products by competitive advertising. (2) price discriminate based upon the price elas

    		•
  • Q : Stickiness of prices in oligopolistic

    The "kinked-demand-curve" model was developed into the 1930 year in part to help describe: (i) barriers to entry in oligopoly markets. (ii) the allegedly excessive stickiness of prices into oligopolistic industries. (iii) how competitive industries be

    		•
  • Q : Economoic the setting of a price

    the setting of a price ceiling below the equililbrium level will

    		•
  • Q : Union Strategies and the Taft-Hartley

    The union strategy made illegal through the Taft-Hartley Act of 1948 was: (1) Jurisdictional strikes centered on which the unions would symbolize a firm’s staff. (2) Contracts in which the firms agreed to preferentially encourage the union members. (3) ‘Ri

    		•
  • Q : Define price ceiling Price ceiling :

    Price ceiling: Price ceiling refers to the highest price fixed by the government beneath the market determined price (that is, equilibrium price) so that requirements might be made accessible to the common people at a reasonable price. In India the go

    		•