Consider Two Restaurants Located Next Door to Each Other: Quick

question 19

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. $$\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Quick Burger } \\\text { Operates a } \\\text { Drive-Through } \\\text { Window }\end{array} & \begin{array} { c } \text { Quick Burger } \\\text { Does Not Operate } \\\text { Drive-Through } \\\text { Window }\end{array} \\\hline \text { Quick Burger } & \$ 24,000 & \$ 15,000 \\\hline \text { The Sunshine Café } & \$ 11,000 & \$ 23,000 \\\hline\end{array}$$ Is it socially optimal for Quick Burger to operate a drive-through window?

• A)No, because The Sunshine Café's payoff is lower when Quick Burger operates a drive-through window.
• B)No, because total payoffs are higher when Quick Burger does not operate a drive-through window.
• C)Yes, because Quick Burger's payoff is higher when Quick Burger operates a drive-though window.
• D)Yes, because total payoffs are higher when Quick Burger operates a drive-through window.

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Definitions:

Financing Plans

Strategies developed by a business to manage its financial resources, including how to raise and allocate capital.

Income Tax

A government levy imposed on individuals or entities' income, varying widely by country, income level, and type of income.

Unamortized Discount

The portion of a bond discount that has not yet been expensed to interest expense over the life of the bond.

Redeemed

In finance, it refers to the repayment or buyback of a debt or security, such as a bond or a share, usually at the maturity date or beforehand.