Answer The statement is false Buying and selling shares of stock is not

Answer the statement is false buying and selling

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Answer: The statement is false. Buying and selling shares of stock is not arbitrage. Arbitrage profits are earned when someone buys a product where its price is low and selling where it is high at the same time; there is no risk involved in arbitrage trades. If transactions costs are zero, arbitrage trades will cause prices to adjust so that they are equal in all markets. When shares of stock are purchased, the buyers do not know whether the price will increase or decrease in the future. There is a risk in buying stocks that their prices will fall; traders will earn a profit if prices rise but will suffer losses if prices fall. Diff: 2 Page Ref: 520/520 Topic: Arbitrage Learning Outcome: Micro 14: Discuss production and pricing decisions within monopolies and how public policies affect monopolies AACSB: Reflective Thinking 24) What is meant by the ʺ law of one price ʺ ? In discussing the law of demand, Hubbard and O ʹ Brien claim there has been no evidence of an exception to the law (that is, no evidence of an upward - sloping demand curve). Are there exceptions to the law of one price? Answer: The law of demand states that identical products should sell for the same price everywhere. But this law refers to a tendency for prices to be equal in different locations, not that such differences never occur. If identical products do sell for different prices in different locations arbitrage profits can be earned by people who buy where the price is low and sell where the price is high. Arbitrage will eventually cause prices to move toward equality, but the law of one price will hold exactly only if transactions costs associated with arbitrage trade are zero. If there are transactions costs, price differences will persist. Diff: 2 Page Ref: 521 - 522/521 - 522 Topic: The Law of One Price Learning Outcome: Micro 14: Discuss production and pricing decisions within monopolies and how public policies affect monopolies AACSB: Reflective Thinking SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 25) The following table contains the actual prices charged by four Websites for the PlayStation 3 game Batman: Arkham City in December 2011.
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  • Fall '13
  • Rhetoric, AACSB, Page Ref, Reflective thinking, Organon

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