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 will not 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 raise prices it will lower its profits.
A)a only
B)a and b only
C)a and c only
D)a, b, and c

Question

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 will not 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 raise prices it will lower its profits.
A)a only
B)a and b only
C)a and c only
D)a, b, and c

Quizplus · Accepted Answer

Option A explains why a popular restaurant would not raise prices high enough to eliminate lines, while option B explains a possible reason for why firms may not raise their prices despite the long lines. Option C provides an unsupported reason for why the restaurant may not want to raise their prices. Therefore, the best choice is B.

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