Question

On the east side of a town, there are multiple fast-food restaurants. On the west side of town, there is only one fast-food restaurant. Explain why the prices at the one restaurant on the west side are likely higher than at the restaurants on the east side of town.

Answer 1

Answer:

There is a lack of competition on the west side of town, so the one restaurant does not need to consider the prices at other restaurants.

Explanation:

When there are multiple businesses selling a similar product, each will compete against the others to try and sell their product to consumers instead of the other businesses selling their products first. Due to this competition, the producers will list the prices based on the prices at the other businesses. Consumers are more likely to purchase cheaper products, which is why the producers will try to list their prices lower than the other producers in hopes of gaining more customers and profit.

If there is only one business in a location that has no competitors, they will list the prices on their own accord, not based on the prices at other businesses.

Because the west side only has one restaurant, their prices will likely be higher than those at other restaurants located elsewhere because the west side restaurant has no competition.

Hope this helps!