ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text: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
Quick Burger Does Not
Drive-Through Window
$ 24,000
$ 17,000
Operate Drive-Through Window
$ 20,000
$ 23,000
Quick Burger
The Sunshine Café
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
The Sunshine Cafe pays Quick Burger $5,000 per month not to operate the drive-through window.
The Sunshine Cafe pays Quick Burger $12,250 not to operate the drive-through window.
Quick Burger pays The Sunshine Cafe $15,250 to operate the drive-through window.
Quick Burger pays The Sunshine Cafe $5,000 to operate the drive-through window.
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