Question

In which of the following conditions does arbitrage occur?

A. When a firm sells a product at higher prices to make a profit from relatively fewer sales.
B. When a firm prices its products at the least cost, risking losses, in order to grab market share.
C. When a firm offers a product at low prices through discount coupons and promotions.
D. When a firm purchases products in a country where prices are lower and resells them in a country where prices are higher.
E. When a firm imports products from a manufacturer and distributes them directly through retail outlets.

Answer 1

D. When a firm purchases products in a country where prices are lower and resells them in a country where prices are higher.

Step-by-step explanation:

Arbitrage is the buying of products/commodities such as shares at a given price and (in most cases) instantly selling at a profit in a different market/country. Differences in exchange rates are often exploited in the execution of an arbitrage to make a profit. Arbitrage is legal.

In other words, arbitrage can be said to occur when a firm purchases products in a country where prices are lower and resells them in a country where prices are higher.