Question

_________ occurs when an individual or business capitalizes on a price differential for a firm's product between two countries by purchasing the product in the country where prices are lower and reselling it in the country where prices are higher.

a. Arbitrage
b. Predatory pricing
c. Experience curve pricing
d. Speculation
e. Multipoint pricing

Answer 1

Correct option is (a)

Step-by-step explanation:

Arbitrage refers to purchase an asset in one market with an intention to sell the same in another market thereby gaining on difference in price. Profit represents the difference in the market prices of the product in different countries.

So, arbitrage occurs when business take advantage of price differentials of product between two countries.

Predatory pricing is setting the prices of products at a very low level forcing the competitors to leave the market.

Experience curve pricing is again setting price below average cost in expectation that increase in production experience will reduce cost eventually.

Speculation is investing on expectation of rise in price in future.