Sunshine Café. The accompanying table shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window.     Quick Burger Operates a Drive-Through Window Quick Burger Does Not Operate Drive-Through Window Quick Burger $ 24,000 $ 12,000 The Sunshine Café $ 15,000 $ 23,000   Suppose Quick Burger has the legal right to operate a drive-through window, and Quick Burger and the Sunshine Café can n

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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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 accompanying table shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window.

 

  Quick Burger Operates a
Drive-Through Window
Quick Burger Does Not
Operate Drive-Through Window
Quick Burger $ 24,000 $ 12,000
The Sunshine Café $ 15,000 $ 23,000

 

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? 

 

Multiple Choice
  •  
    Quick Burger pays The Sunshine Cafe $10,000 to operate the drive-through window.
  •  
    Quick Burger pays The Sunshine Cafe $12,750 to operate the drive-through window.
  •  
    No arrangement is necessary to achieve the socially optimal outcome.
  •  
    The Sunshine Cafe pays Quick Burger $12,750 not to operate the drive-through window.
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