Use the table for the question(s)below.
Consider the following prices from a McDonald's Restaurant:
-A McDonald's Big Mac Extra Value Meal® consists of a Big Mac Sandwich,Large Coke,and a Large Fry.Assume that there is a competitive market for McDonald's food items and that McDonald's sells the Big Mac value meal for $4.79.Does an arbitrage opportunity exist and if so how would you exploit it? How much would you make on one extra value meal?
A)Yes,buy the Big Mac Extra Value Meal® and then sell Big Mac,Coke,and Fries to make arbitrage profit of $0.68.
B)No,no arbitrage opportunity exists.
C)Yes,buy Big Mac,Coke,and Fries then sell the Extra Value Meal® to make an arbitrage profit of $1.09.
D)Yes,buy a Big Mac,Coke,and Fries then sell the Extra Value Meal® to make an arbitrage profit of $0.68.

Question

Use the table for the question(s)below.
Consider the following prices from a McDonald's Restaurant: 
-A McDonald's Big Mac Extra Value Meal® consists of a Big Mac Sandwich,Large Coke,and a Large Fry.Assume that there is a competitive market for McDonald's food items and that McDonald's sells the Big Mac value meal for $4.79.Does an arbitrage opportunity exist and if so how would you exploit it? How much would you make on one extra value meal?
A)Yes,buy the Big Mac Extra Value Meal® and then sell Big Mac,Coke,and Fries to make arbitrage profit of $0.68. 
B)No,no arbitrage opportunity exists. 
C)Yes,buy Big Mac,Coke,and Fries then sell the Extra Value Meal® to make an arbitrage profit of $1.09. 
D)Yes,buy a Big Mac,Coke,and Fries then sell the Extra Value Meal® to make an arbitrage profit of $0.68.

Quizplus · Accepted Answer

If the individual items (Big Mac, Large Coke, Large Fry) cost more than $4.79 when purchased separately, you can buy the meal for $4.79 and sell the items individually for a higher total price, making an arbitrage profit of $0.68.

Use the Table for the Question(s)below