Assuming zero transactions costs, if your local grocer buys oranges at a low price from an orchard and resells them to you at a higher price, then the grocer's revenue minus costs is known as

Question

Ashton Johnson

Business

2 December, 01:56

Assuming zero transactions costs, if your local grocer buys oranges at a low price from an orchard and resells them to you at a higher price, then the grocer's revenue minus costs is known as

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Answers (1)

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Kaleb Bridges · Answer 1

The arbitrage profits to the grocer.

Explanation:

Arbitrage refers to the process of simultaneous purchase and sale of an asset to earn profits. The traders exploit the price difference in different markets through arbitrage.

Here, in the given example, the purchase of oranges from the orchard and then its resale to the consumers is an example of arbitrage. The orchard and consumers are in two different markets.

The profit earns through this purchase and sale of oranges will be considered arbitrage profit.