Suppose the price of crude oil is $95 per barrel in New York and $85 per barrel in Texas, and the transaction costs for trading between the two markets are $15 per barrel. What actions should you take to arbitrage this price difference?
A) Buy oil in Texas and sell oil in NY
B) Sell oil in Texas and buy oil in NY
C) Buy oil in both markets and wait for higher prices
D) Do not buy or sell oil in either market
D
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The cost associated with foregoing the opportunity to employ a resource in its best alternative use is called:
A. an avoidable cost. B. a sunk cost. C. an opportunity cost. D. the user cost of capital.
The possibility of not getting paid back on a loan is known as
A. financial intermediation. B. the risk of default. C. deposit risk. D. arbitrage.
From the supply-side perspective, the economy may fail to reach full employment because of
A. Declining costs. B. Taxes that are too high. C. Lack of government regulation. D. Production incentives.
The Consumer Price Index (CPI) measures the changes of the
A) prices paid by consumers for a fixed market basket of consumer goods and services. B) quantities of a fixed market basket of goods produced by businesses. C) lowest prices paid by consumers for a fixed market basket of consumer goods and services. D) prices paid by all businesses for a fixed market basket of production resources. E) prices paid by consumers and businesses for a fixed market basket of goods and services.