Use the table for the question(s)below.
Consider the following prices from a McDonald's Restaurant:

-A McDonald's Big Mac 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 exists and if so how would you exploit it and how much would you make on one value meal?
A)Yes,buy a value meal and then sell the Big Mac,Coke,and fries to make arbitrage profit of $0.68.
B)No,no arbitrage opportunity exists.
C)Yes,buy a Big Mac,Coke,and fries,then sell a value meal to make arbitrage profit of $1.09.
D)Yes,buy a Big Mac,Coke,and fries,then sell a value meal to make arbitrage profit of $0.68.
E)Yes,buy a value meal and then sell the Big Mac,Coke,and fries to make arbitrage profit of $1.09.

Question

Use the table for the question(s)below.
Consider the following prices from a McDonald's Restaurant:
 
-A McDonald's Big Mac 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 exists and if so how would you exploit it and how much would you make on one value meal?
A)Yes,buy a value meal and then sell the Big Mac,Coke,and fries to make arbitrage profit of $0.68. 
B)No,no arbitrage opportunity exists. 
C)Yes,buy a Big Mac,Coke,and fries,then sell a value meal to make arbitrage profit of $1.09. 
D)Yes,buy a Big Mac,Coke,and fries,then sell a value meal to make arbitrage profit of $0.68. 
E)Yes,buy a value meal and then sell the Big Mac,Coke,and fries to make arbitrage profit of $1.09.

Quizplus · Accepted Answer

Arbitrage involves buying and selling the same asset in different markets to profit from price differences. If buying the value meal and selling its components individually yields a profit, an arbitrage opportunity exists.

Use the Table for the Question(s)below