Question

(6 marks) "The past eight months have been devastating for Hong Kong's food and beverage industry as a result of anti-government protests and now, the coronavirus outbreak. A slew of fine dining restaurants have temporarily closed - the most recent being John Anthony, Theo Mistral by Theo Randall, Gaddi's, Chesa and LH Group's hotpor outlets, as well as many in Macau. Meanwhile, Hunter & the Chase, Bibo and Root Central are among the restaurants in Hong Kong to have closed permanently." Source: Furniss, T. (2020, Feb 21). Coronavirus piles on misery for Hong Kong fine dining restaurants already hurting from months of anti-government protest. Style. https://www.scmp.com/magazines/style/news-trends/article/3051760/coronavirus-piles-misery-hong-kong. fine-dining Some restaurants chose to close temporarily during this period of pandemic, while some other restaurants did not do so. In your own words, explain this phenomenon within 100 words. Hint: You may refer to Mankiw Ch.14, p.275-276, "Near-empty restaurants and off- season miniature golf" to answer this question.

Answer 1

1. Restaurants that decided to closed permanently did so because their long-run total revenue had become less than long-run total cost

2. Restaurants that decided to closed temporarily did so because their short-run total revenue became less than short run-variable cost but there long -run total revenue were more than long-run total cost

3. Restaurants that decided to neither close temporarily or permanently did so because their short-run total revenue were more than short-run variable cost and long -run total revenue were also more than long-run total cost