Consider the Following Prices from a McDonald's Restaurant

question 56

Multiple Choice

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

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Definitions:

Proactive Interference

A phenomenon where older memories interfere with the recall of newer memories, a form of cognitive interference that can impede learning and memory retention.

Semantic Codes

A type of cognitive encoding that involves the storage of information in memory according to its meaning rather than the sound or vision of it.

STM Loss

Short-Term Memory loss; a condition where an individual has difficulty retaining recent information over short periods.

Decay Theory

The hypothesis that memories fade or are lost over time as a result of the mere passage of time, leading to forgetting.