You Are Up Late Watching TV One Night and See

question 69

Short Answer

You are up late watching TV one night and see an ad from Ronco for the Dial-o-matic food slicer.You learn that the Dial-o-matic sells for $29.95.But wait,there's more! Ronco is also including in this deal a set of Ginsu steak knives worth $10.95 and another free gift worth $7.95.Assuming that there is a competitive market for Ronco items,at what price must Ronco be selling this three item Dial-o-matic deal to insure the absence of an arbitrage opportunity and uphold the law of one price?

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Definitions:

Socio-Economic Groups

Categorizations of people based on their social and economic factors, such as income, occupation, and education.

Law Of Small Numbers

A mental inclination that causes individuals to form wide-reaching conclusions based on limited data samples.

Gambler's Fallacy

The erroneous belief that if an event occurs more frequently than normal during a given period, it will happen less frequently in the future, or vice versa.

Midterms

Examinations given in the middle of an academic term to assess students' understanding of the course material up to that point.