According to a New York Times Article, Shoppers from New

question 70

Multiple Choice

According to a New York Times article, shoppers from New York City have played a game of "retail arbitrage" by shopping at malls in Northern New Jersey, a state where there is no tax on clothing and shoes. Even after accounting for transaction costs, shoppers could still save money on their clothing and footwear purchases. Source: Ken Belson and Nate Schweber, "Sales Tax Cut in City May Dim Allure of Stores Across Hudson," New York Times, January 18, 2007.
Is the term "arbitrage" correctly used here?

• A) Yes, because shoppers were able to purchase items at lower prices even after deducting their transaction costs.
• B) No, "arbitrage" means buying at a low price and reselling at a higher price, but no resale takes place here.
• C) Yes, arbitrage applies even if no resale takes place; in this case the profits are pocketed by the customers themselves.
• D) No, "arbitrage" does not apply to markets that are not in the same geographic area.

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