Wednesday, February 29, 2012

Economically speaking, why do restaurants close earlier than others?

I need to know this for my economics class... the question is why economically would some restaurants at the union close as early as 3:30 instead of staying open 24 hours like others places.

Thanks!!Economically speaking, why do restaurants close earlier than others?
All companies including restaurants set production up to a point where marginal cost = marginal revenue. Recall that the marginal revenue curve is declining and the marginal cost curve is increasing as output goes up. One restaurant may have a higher marginal revenue curve, so marginal revenue = marginal cost at a higher production point.



In other words, you have two restaurants. With paying people overtime, it costs increasingly more to operate longer hours in a day. But restaurant B makes a lot more money than Restaurant A. So while it's not worth its while A to stay open past 3:30, B may make so much more than it is worthwhile for it to stay open 24 hours even with the higher labor costs associated with overtime pay.Economically speaking, why do restaurants close earlier than others?
So their employees wouldn't have to work as long/much.

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