2. A national fast food restaurant chain has recently made the decision that the

Question

2. A national fast food restaurant chain has recently made the decision that their breakfast menu will now be available all day long. The product management team overseeing the breakfast lines – including biscuit sandwiches, pancakes, muffins, and sausage is ecstatic over the decision. However, the product management team for the more traditional lunch and dinner menu is not so happy. a. Utilizing the concept of opportunity costs, why would the latter product management team be less than receptive to the all-day breakfast menu? b. Using only an illustrative graph with no numbers, demonstrate how the decision to offer an all-day breakfast menu would affect the location of the restaurant on the Production Possibility Frontier (PPF). Assume in both cases that the restaurant is efficient today and would remain so after the all-day breakfast menu was introduced.

Explanation / Answer

a. An opportunity cost is the cost of an alternative that must be forgone so that certain action is pursued. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available choice. In the above question, the production management team overseeing the traditional lunch and dinner menu is less than receptive to the all-day breakfast menu because in this case the benefit of lunch and dinner menu (which has some value) is forgone. In the restaurant, along with all-day breakfast menu, lunch and dinner menu would be continued but may not bring desired dividends. However, the restaurant has to bear the cost of running lunch and dinner menu also.The opportunity cost of having all-day breakfast menu is the money the restaurant would have earned if the customer took it instead of lunch and dinner.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.