Homework Answers
Option C.
- Arbitrage is the process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference.
- An arbitor by taking advantage of a higher price in one market and the lower price in another market will first purchase any good from the lower price market and then sell the same good in the higher price market.
- This allows the arbitor to earn higher profits as he sells the good for a Higher rate than the rate at which he actually purchased the good.
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