Author Question: Use the table for the question(s) below.Consider the following prices from a McDonald's ... (Read 50 times)

clmills979 · **on:** Jul 9, 2019

Use the table for the question(s) below.

Consider the following prices from a McDonald's Restaurant:

Big Mac Sandwich	$2.99
Large Coke	$1.39
Large Fry	$1.09

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 exists and if so how would you exploit it and how much would you make on one value meal?
◦ Yes, buy a Big Mac, Coke, and fries, then sell a value meal to make arbitrage profit of $1.09.
◦ Yes, buy a Big Mac, Coke, and fries, then sell a value meal to make arbitrage profit of $0.68.
◦ Yes, buy a value meal and then sell the Big Mac, Coke, and fries to make arbitrage profit of $0.68.
◦ No, no arbitrage opportunity exists.

yotaSR5 · **Reply #1 on:** Jul 9, 2019

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