You See on Craigslist That a Used XBOX 360 Sells

question 43

Multiple Choice

You see on Craigslist that a used XBOX 360 sells for $100 and a new XBOX 360 sells for $300. Is this an arbitrage opportunity?

• A) No, because the market fora used XBOX 360 is not the same as the market for a new XBOX 360.
• B) No, because the market for a used XBOX 360 is a competitive market.
• C) Yes, because the market for a used XBOX 360 is a competitive market.
• D) Yes, because the market for a used XBOX 360 is not the same as the market for a new XBOX 360.

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Definitions:

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, detailing net profit or loss.

Variable Manufacturing Costs

Costs that change in proportion to the level of production output, such as raw materials and direct labor costs.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.

Product Costs

Costs that are involved in acquiring or manufacturing a product, typically including direct materials, direct labor, and manufacturing overhead.