Luke\'s Express Diner is the only place that sells burgers in a remote town in A
ID: 1119769 • Letter: L
Question
Luke's Express Diner is the only place that sells burgers in a remote town in Arizona. As one of the long-time residents of the town, Bertha Hayes contends that the burgers at Luke's are priced a bit too high. She claims that this is because the diner enjoys monopoly power in the town. Her neighbor, Ruth Ernes, disagrees that the diner is in a position to over-price products due to monopoly power because she herself knows a lot of people who don't like the food there.
Which of the following if true will weaken berthas argument?
a. The local government issues a limited number of restuarant licenses every year
b. the diner is highly rated by food critics and is a very popular eating place in the town
c. lukes express diner cut prices when the nearby coffeeshop cut prices on its sandwiches
d. monopolies in the area have damaged economic efficiency
e. lukes express diner recently increased the price of a burger due to an increase in meat prices, but burger sales remianed unchanged
Explanation / Answer
Option c is correct
Luke's express diner cut prices when the nearby coffeeshop cut prices on its sandwiches (The diner had to base its pricing decisions based on its competition which means that Luke's diner doesn't have a monopoly power in this case)
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