Lou buys a Star Wars: The Force Awakens poster from Evan for 30 and resells it on eBay for 60. Which of the following statements is false?
A) Lou has probably incurred some costs in connection with this sale.
B) It is possible that Evan has earned some producer surplus from this transaction.
C) Lou has earned some arbitrage profits, assuming that transactions costs are negligible.
D) The transaction has made Evan worse off because he undersold the poster.
Question 2
Consider two oligopolistic industries selling the same product in different locations. In the first industry, firms always match price changes by any other firm in the industry.
In the second industry, firms always ignore price changes by any other firm. Which of the following statements is true about these two industries, holding everything else constant?
A) Market prices are likely to be the same in both markets because they are both oligopolistic markets.
B) No conclusions can be drawn about the pricing behavior under these very different firm behaviors.
C) Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes.
D) Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes.
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