A McDonald's Big Mac value meal consists of a Big Mac sandwich, 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 $4.59
Consider the following prices from a McDonald's Restaurant:
Big Mac Sandwich $2.68
Large Coke $1.45
Large Fries $1.13
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 $0.67.
B) No, no arbitrage opportunity exists.
C) Yes, buy a Big Mac, Coke, and fries, then sell a value meal to make arbitrage profit of $1.34.
D) Yes, buy a Big Mac, Coke, and fries, then sell a value meal to make arbitrage profit of $0.67.
Answer: A
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