Arbitrage across borders is only profitable when the same item has prices that are:
AUnknown to the trader
BDifferent in each place
CIdentical in each place
DFixed by one government
Answer & Solution
Correct answer: B. Different in each place
1. Arbitrage depends on a gap the trader can capture.
2. Arbitrage is buying and selling goods or currencies across international borders.
3. It is done at a profit.
4. A profit requires buying lower in one place and selling higher in another.
5. So the same item must carry different prices in each place.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 15 'Exchange Rates and International Capital Flows'_
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