a. Predict whether the price setting of KFC China is at, above, or below marginal cost

(i) in the short run and (ii) in the long run.

b. If KFC China starts charging customers more for a localized menu and a family-friendly atmosphere, would it make the market for fast food inefficient?

KFC China’s menu has evolved over the years and become highly localized. It contains no “super-size”
items but includes oven-roasted chicken, wraps, and different proteins. In 2002, KFC China started serving breakfast, introducing congee, a breakfast favorite in China, on its menu. Further, to appeal to families, many outlets offer special meals, a play area, and activities for kids while their parents dine.