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Figure: The Restaurant Market
-(Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant. Assume that many firms, differentiated products, and easy entry and exit characterize the restaurant market. If the restaurant shown here were to raise its price above the profit-maximizing price, its total revenue would:
A) decrease.
B) increase.
C) not change.
D) Not enough information is given to answer the question.

Question

Use the following to answer questions:
Figure: The Restaurant Market 
-(Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant. Assume that many firms, differentiated products, and easy entry and exit characterize the restaurant market. If the restaurant shown here were to raise its price above the profit-maximizing price, its total revenue would:
A) decrease. 
B) increase. 
C) not change. 
D) Not enough information is given to answer the question.

Quizplus · Accepted Answer

In a market with many firms and differentiated products, if a restaurant raises its price above the profit-maximizing level, it will likely lose customers to competitors, leading to a decrease in total revenue.

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