Use the Table for the Question(s) Below -A McDonald's Big Mac Value Meal Consists of a Big

question 65

Multiple Choice

Use the table for the question(s) below.
Consider the following prices from a McDonald's Restaurant:
$\begin{array} { l l } \hline \text { Big Mac } & \$ 2.99 \\\hline \text { Large Coke } & \$ 1.39 \\\hline \text { Large Fries } & \$ 1.09 \\\hline\end{array}$
-A McDonald's Big Mac value meal consists of a Big Mac, a large Coke, and a large fries. 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) Yes, buy a Big Mac, Coke, and fries, then sell a value meal to make arbitrage profit of $1.09.
• C) No, no arbitrage opportunity exists.
• D) Yes, buy a Big Mac, Coke, and fries, then sell a value meal to make arbitrage profit of $0.68.

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