Consider Two Restaurants Located Next Door to Each Other: Quick

question 8

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. $$\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Quick Burger } \\\text { Operates a } \\\text { Drive-Through } \\\text { Window }\end{array} & \begin{array} { c } \text { Quick Burger } \\\text { Does Not Operate } \\\text { Drive-Through } \\\text { Window }\end{array} \\\hline \text { Quick Burger } & \$ 24,000 & \$ 15,000 \\\hline \text { The Sunshine Café } & \$ 11,000 & \$ 23,000 \\\hline\end{array}$$ Suppose Quick Burger has the legal right to operate a drive-through window, and Quick Burger and the Sunshine Café can negotiate with each other at no cost. Which of the following arrangements would lead to the socially optimal outcome?

• A)Quick Burger pays The Sunshine Café $12,500 per month to operate the drive-through window.
• B)Quick Burger pays The Sunshine Café $10,500 per month to operate the drive-through window.
• C)The Sunshine Café pays Quick Burger $12,500 per month not to operate the drive-through window.
• D)The Sunshine Café pays Quick Burger $10,500 per month not to operate the drive-though window.

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Definitions:

Cones

Photoreceptor cells in the retina of the eye responsible for color vision and function best in relatively bright light.

Rods

Photoreceptor cells in the retina of the eye that are sensitive to low light levels and play a key role in night vision.

Specialized Cells

Cells that have developed unique structures and functions to perform specific tasks within an organism, such as nerve or muscle cells.

Nervous System

The complex network of nerves and cells that transmits messages between the brain and the rest of the body.