Question

ccording to your authors, entrepreneurial innovation is similar to "arbitrage" because both activities ultimately involve Select one: a. obtaining inputs at relatively high prices and selling the output at lower prices. b. obtaining inputs at relatively low prices and selling the output at higher prices. c. the absence of uncertainty. d. greed.

Answer 1

Answer:

B. obtaining inputs at lower prices and selling the output at higher prices.

Explanation:

Arbitrage refers to the activity of trying to earn a gain, by exploiting the inefficiencies between two markets. The rule of arbitrage is to buy at a low price from one market and sell at a higher price in another market.

When interest rate parity theory exists and fair pricing prevails, arbitrage opportunities are wiped out.  

Entrepreneurial innovation refers to innovation with respect to products and their attributes.  It may also refer to entrepreneur attaining new skill sets and creativity which help in better operations.

Such innovation is also characterized by buying inputs at a lower price and selling the output at a higher price thereby maximizing profits. Buying inputs at a low price indicates innovation in the form of optimal utilization of resources.

Thus, both arbitrage and entrepreneurial innovation are driven by the common factor of buying low and selling high, to maximize gains.