The following question relate to a community that is circular in nature with a one mile circumference. There are 81 people evenly distributed around the lake where the town is built. The travel cost is $10 per mile, a restaurant costs $100 to set up, and the cost per meal is $2. If the town was one restaurant below its optimal number when you are brought in as a consultant to help decide some planning issues, and the city fathers want to know how much the town could save overall if it built another restaurant, what would you tell them?
What will be an ideal response?
Since transportation costs fall by $203 and restaurant startup costs rise by $100, the town's people could save $103 by having one more restaurant.
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