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 fries. Assuming that there is a competitive market for McDonald's food items, at what price must a Big Mac value meal sell to insure the absence of an arbitrage opportunity and uphold the Law of One Price?
A) $4.08
B) $4.62
C) $5.44
D) $6.80

Question

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 fries. Assuming that there is a competitive market for McDonald's food items, at what price must a Big Mac value meal sell to insure the absence of an arbitrage opportunity and uphold the Law of One Price?
A) $4.08 
B) $4.62 
C) $5.44 
D) $6.80

Quizplus · Accepted Answer

C) $2.81 + $1.49 + $1.14 = $5.44

Consider the Following Prices from a McDonald's Restaurant: a McDonald's