On the east side of a town, there are multiple fast-food restaurants. On the west side of town, there is only one fast-food restaurant. Explain why the prices at the one restaurant on the west side are likely higher than at the restaurants on the east side of town.(1 point)

Question

Responses

There is a lack of competition on the west side of town, so the one restaurant does not need to consider the prices at other restaurants.
There is a lack of competition on the west side of town, so the one restaurant does not need to consider the prices at other restaurants.

Since it is the only restaurant on the west side of town, the one restaurant is likely to have fewer customers, so it needs to raise prices to compensate.
Since it is the only restaurant on the west side of town, the one restaurant is likely to have fewer customers, so it needs to raise prices to compensate.

Competition leads to higher prices, so the one restaurant on the west side of town has to have higher prices to compete with all of the restaurants on the east side.
Competition leads to higher prices, so the one restaurant on the west side of town has to have higher prices to compete with all of the restaurants on the east side.

The prices on the east side of town do not matter since customers will choose where to eat solely based on brand loyalty.

Answer 1

The best explanation for why the prices at the one restaurant on the west side of town are likely higher than at the restaurants on the east side is:

There is a lack of competition on the west side of town, so the one restaurant does not need to consider the prices at other restaurants.

This lack of competition allows the sole restaurant to set higher prices because customers do not have alternative fast-food options nearby to choose from.