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 insure 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

Question

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 insure 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

Quizplus · Accepted Answer

The Law of One Price states that identical goods should sell for the same price in a competitive market. The price of the Big Mac value meal should equal the sum of the individual prices of the Big Mac sandwich, large Coke, and large fry. Assuming the given options represent the total of these individual prices, $5.47 is the correct price to prevent arbitrage opportunities.

Use the Table for the Question(s)below