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 aDrive-Through WindowQuick Burger Does NotOperate Drive-Through WindowQuick Burger$ 24,000$ 12,000The 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.

Firstly Let's first calculate the total payoffs in both the cases, When quick burger operates a…

Answered: Sunshine Café. The accompanying table…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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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