In recent years, McDonald’s has faced increased competition from other fast-food restaurants. In an attempt to differentiate itself from fast-food competitors, McDonald’s has responded by remodeling some restaurants to include kiosks that customers can use to pay for their orders and to request table service. Remodeling a restaurant can cost as much as $60,000. McDonald’s expects that customers will spend more on food when they order with kiosks. Suppose McDonald’s begins to earn an economic profit in the restaurants offering table service and kiosks.

a. How are other fast-food restaurants likely to respond?

b. Is this new strategy likely to enable McDonald’s to earn an economic profit in the long run? Briefly explain.