Recall the Application about food and drink pricing during "happy hour" at bars and restaurants to answer the following question(s).
-Recall the Application. In a market subject to monopolistic competition, a restaurant's rational response to more elastic demand is to increase its price.

Question

Quizplus · Accepted Answer

In a market subject to monopolistic competition, a restaurant's rational response to more elastic demand is to lower its price, not increase it. This is because increased competition makes it important for restaurants to attract more price-sensitive customers with lower prices, rather than risk losing them to competitors who offer cheaper alternatives.

Recall the Application About Food and Drink Pricing During "Happy