Use the Table for the Question(s)below

question 65

Multiple Choice

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.Assuming that there is a competitive market for McDonald's food items,at what price must a Big Mac value meal sell to ensure the absence of an arbitrage opportunity and uphold the Law of One Price?

• A)$4.08
• B)$4.38
• C)$5.47
• D)$5.77
• E)$5.00

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Definitions:

US

The abbreviation for the United States, a country located primarily in North America.

Blocking Effect

A result showing that an animal learns nothing about a stimulus if the stimulus provides no new information.

Conditioning

A behavioral process whereby a response becomes more frequent or more predictable in a given environment as a result of reinforcement, with reinforcement typically being a stimulus or reward for a desired response.

Surprise

An emotional response to unexpected events or information, characterized by heightened interest and physiological arousal.