Consider Two Restaurants Located Next Door to Each Other: Quick

question 127

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. $$\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Quick Burger } \\\text { Operates a } \\\text { Drive-Through } \\\text { Window }\end{array} & \begin{array} { c } \text { Quick Burger } \\\text { Does Not Operate } \\\text { Drive-Through } \\\text { Window }\end{array} \\\hline \text { Quick Burger } & \$ 24,000 & \$ 15,000 \\\hline \text { The Sunshine Café } & \$ 11,000 & \$ 23,000 \\\hline\end{array}$$ If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café can negotiate with each other at no cost, then will Quick Burger operate a drive-though 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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Definitions:

Physical Count

The process of counting inventory by hand to verify the quantities on hand, typically performed at the end of an accounting period to ensure accurate inventory records.