Jamal, Lawson, and Kyle Have Been Standing in Line for Almost

question 91

Multiple Choice

Jamal, Lawson, and Kyle have been standing in line for almost an hour waiting to be served at Kirala, a popular new Japanese restaurant. It is possible that some of the people in line won't be served at all before the restaurant closes. Which of the following could explain why the restaurant does not simply raise prices high enough to eliminate the lines?
a. In situations where consumption takes place publicly, demand for the product is also influenced by how many other people are buying the product. Consequently, a popular restaurant that increased its prices enough to eliminate lines might find that it had also eliminated its popularity.
b. Firms may sometimes not raise their prices for fear that it violates people's sense of fairness and might alienate customers.
c. The demand for restaurant meals is relatively elastic and if the firm raises prices it will lower its profits.

• A) a only
• B) a and b only
• C) a and c only
• D) a, b, and c

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Definitions:

Equilibrium Wage

The compensation level at which labor supply meets labor demand.

Economic Profit

Total revenue minus total cost, including both explicit and implicit costs.

Barbershops

Establishments that provide hair cutting, grooming, and sometimes additional services primarily for men.

Discrimination

Unfair or prejudicial treatment of individuals based on characteristics such as race, gender, age, or sexual orientation.