Which of the Following Offers the Best Reason Why Restaurants

question 56

Multiple Choice

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

• A)Restaurants do not sell identical products.
• B)Restaurants compete in small market areas - neighbourhoods and cities - rather than in regional or national markets.Therefore, restaurants are not small relative to their market size.
• C)Restaurants usually have entry barriers in the form of zoning restrictions and health regulations.
• D)Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning.

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Definitions:

Expected NPV

The anticipated net present value of an investment, considering various future scenarios and their probabilities.

Cost of Capital

The minimum expected return necessary to attract investors to provide capital for a project or investment.

Certainty Equivalent Approach

A method used to evaluate investment opportunities under conditions of uncertainty, adjusting future cash flows to present value as if they were certain.

Forecast Cash Flow

The estimation of the amount of money expected to be received and paid out over a future period.