Question

1. What consideration must the restaurant owner weigh in whether to open for lunch?

2. What is the role of fixed cost in the owner's decision?

Answer 1

1. A restaurant owner must have to bare a fixed cost for opening the restaurant. Now if he opens it for lunch, it will have to remain open for comparatively long hours. In that case will have to bare extra cost. Now to decide whether to open for lunch it will have to keep three things in mind at first.
i. The lunch should minimize the cost.
ii. Cost of production must be covered by the revenue, atleat they must be equal.
iii. Inputs must be optimally used.

2. The owner have to pay the fixed cost even if he keeps close the restraunrant for long. Thus fixed cost has nothing to do with the decision of restraurant owner.