Walgreens Company (NYSE: WAG) Is Currently Trading at $48

question 41

Multiple Choice

Walgreens Company (NYSE: WAG) is currently trading at $48.75 on the NYSE. Walgreens Company is also listed on NASDAQ and assume it is currently trading on NASDAQ at $48.50. Does an arbitrage opportunity exist and, if so, how would you exploit it and how much would you make on a block trade of 100 shares?

• A) No, no arbitrage opportunity exists.
• B) Yes, buy on NASDAQ and sell on NYSE, make $25.
• C) Yes, buy on NYSE and sell on NASDAQ, make $25.
• D) Yes, buy on NASDAQ and sell on NYSE, make $250.

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Definitions:

Economic Profit

A calculation of profitability that takes into account both the direct costs and opportunity costs of pursuing a particular course of action.

Economies Of Scale

The situation when a firm’s average total cost of producing a product decreases in the long run as the firm increases the size of its plant (and, hence, its output).

Excess Production

The situation where more units of a product are produced than are demanded, often resulting in surplus inventory.

Economic Theory

Economic theory encompasses models and principles that explain the functioning of economies, markets, and the behavior of economic agents. It seeks to understand how resources are allocated, prices are set, and wealth is distributed.