Question

Being in a competitive industry, how can a restaurant be profitable in the long run?

Answer 1

Answer : In competitive industry , the restaurant is a price taker. But there is no restriction on quantity level and quality level. In long run many restaurants enter into the industry. In this situation, a restaurant can make it's profit by increasing the selling quantity level. And to increse the selling quantity level, the restaurant has to increase the food quality level and taste level in comparison to others. This attract the more customers. As a result the restaurant sell more quantities of food which increase the profit level of restaurant in long run.