Use the following to answer question(s): The Restaurant Model

-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.If the restaurant shown here were to raise its price above the profit-maximizing price, it would experience:
A) a reduction in total revenue.
B) an increase in total revenue.
C) no change in total revenue.
D) There is not enough information given to answer the question.

Question

Use the following to answer question(s): The Restaurant Model
 
-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.If the restaurant shown here were to raise its price above the profit-maximizing price, it would experience:
A) a reduction in total revenue. 
B) an increase in total revenue. 
C) no change in total revenue. 
D) There is not enough information given to answer the question.

Quizplus · Accepted Answer

In a market with many firms and differentiated products, there are close substitutes available to consumers. If the restaurant raises its price above the profit-maximizing price, consumers will switch to other similar restaurants, resulting in a decrease in demand for their product. As a result, the restaurant will experience a reduction in total revenue.

Use the Following to Answer Question(s): the Restaurant Model