Assume that the Indian restaurant industry is monopolistically competitive in London.Garam Masala,an Indian restaurant near Piccadilly Circus,lowers its prices by 10%,but all the other Indian restaurants in London keep their prices unchanged.Which of the following is most likely to occur?

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Quizplus · Accepted Answer

In a monopolistically competitive market, firms have some degree of market power despite the presence of many competitors. By lowering its prices, Garam Masala can attract more customers from its competitors, as consumers are likely to be drawn to the lower prices for a similar product. This does not guarantee an increase in profits (choice C) due to the potential decrease in revenue per unit sold, and it's unlikely that all other restaurants will lose all their customers (choice A) or that Garam Masala will lose customers (choice B) as a result of lowering prices.

Assume That the Indian Restaurant Industry Is Monopolistically Competitive in London.Garam