Use the following to answer question(s): The Restaurant Model

-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.If the restaurant shown here is typical of others in the community, then in the long run, we would expect to observe:
A) restaurants leaving the market.
B) new restaurants entering the market.
C) neither entry nor exit.
D) There is not enough information given to answer the question.

Question

Use the following to answer question(s): The Restaurant Model
 
-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.If the restaurant shown here is typical of others in the community, then in the long run, we would expect to observe:
A) restaurants leaving the market. 
B) new restaurants entering the market. 
C) neither entry nor exit. 
D) There is not enough information given to answer the question.

Quizplus · Accepted Answer

The exhibit shows a market structure with easy entry and exit, which implies that new restaurants can enter the market easily. If the restaurant shown is typical of others in the community, then we can expect that new restaurants will enter the market in the long run. Therefore, the best choice is B, new restaurants entering the market.

Use the Following to Answer Question(s): the Restaurant Model