Which of the following does not represent an arbitrage transaction?
A) Traders buy silks where they are abundant and cheap, and haul them along a trail to another place where they would be quite scarce and valued.
B) An investor buys a stock when the company is new and relatively unknown and then sells the stock for a much higher price when the company is well-known and profitable.
C) Someone buys a block of Final Four tickets and scalp them at the game.
D) A boat manufacturer buys the electrical components for its boats from the lowest cost supplier and then sells the boats to consumers.

Question

Quizplus · Accepted Answer

Choice D does not involve buying and selling a security or asset with the intention of making a profit from the price difference. It is simply a business practice of buying components at a low cost to maximize profits. The other choices, A, B, and C, all involve buying and selling assets with the aim of making a profit from market inefficiency or price discrepancies.

Which of the Following Does Not Represent an Arbitrage Transaction