Consider Two Restaurants Located Next Door to Each Other: Quick

question 63

Multiple Choice

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. $$\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Quick Burger Operates a } \\\text { Drive-Thrmugh Windav }\end{array} & \begin{array} { c } \text { Quick Burger Daes Nat } \\\text { Operate Brive-Thraugh Window }\end{array} \\\hline \text { Quick Burper } & \$ 24,000 & \$ 15,000 \\\hline \text { The Surshine Café } & \$ 11,000 & \$ 23,000 \\\hline\end{array}$$ If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-through window?

• A)No, because it is not socially efficient to operate a drive-through.
• B)Yes, because Quick Burger's payoff is higher when it operates a drive-through.
• C)No, because it would lower the payoff for The Sunshine Café.
• D)It cannot be determined.

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