A McDonald's Big Mac Value Meal Consists of a Big

question 71

Multiple Choice

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 exist and,if so,how would you exploit it and how much would you make on one extra value meal?

• A) Yes, buy an extra value meal and then sell the Big Mac, Coke, and Fries to make an arbitrage profit of $0.68
• B) No, no arbitrage opportunity exists
• C) Yes, buy a Big Mac, Coke, and Fries then sell the value meal to make an arbitrage profit of $1.09
• D) Yes, buy a Big Mac, Coke, and Fries then sell the value meal to make an arbitrage profit of $0.68

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Definitions:

Lease

A contractual agreement by which one party conveys property, services, or land to another party for a specified period of time, in return for periodic payments.

UCC

Uniform Commercial Code; a comprehensive set of laws governing all commercial transactions in the United States.

Copyright

A legal right granted by the state to the creator of an original work, allowing exclusive publication, distribution, and use for a specified period.

Lessor

The party who owns a property or asset and leases it out to another party, known as the lessee, under a lease agreement.