When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated?

Question

Quizplus · Accepted Answer

Principle (i) - sunk cost fallacy is demonstrated as the restaurant is likely continuing to operate for lunch service due to the cost already invested in staying open during those hours, rather than making a rational decision based on current demand.

Principle (iii) - marginal cost-benefit analysis is also demonstrated as the restaurant is potentially losing money by staying open for lunch if there are not enough customers to offset the cost of operating during those hours.

When a Restaurant Stays Open for Lunch Service Even Though