Assume You Have £100 and Can Exchange Can$180 for £100

question 37

Multiple Choice

Assume you have £100 and can exchange Can$180 for £100.Also assume you can exchange $1 for Can$1.1417 and £1 for $1.5649.How much arbitrage profit in pounds can you earn? Ignore transaction costs.

• A)£.75
• B)£ 1.09
• C)£ 2.02
• D)£1.96
• E)£.83

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Definitions:

Product Differentiation

The process of distinguishing a product or service from others, to make it more attractive to a particular target market.

Total Market

The entirety of the demand and supply for a particular good or service across all its potential markets.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and product differentiation.

Oligopolistic

Pertaining to a market structure characterized by a small number of firms controlling the majority of the market share, often leading to coordinated or interdependent market behavior.