Question

A town has many fast food restaurants, which charge an average of $6 for a hamburger. However, one fast food restaurant charges $10 for a hamburger and remains very competitive. Which of the following situations could not, by itself, explain this restaurant’s ability to charge a higher price?a. The restaurant is in a convenient location near several schools and businesses.b. The restaurant pays higher monthly rent than its competitors.c. The restaurant has been around for many years and customers have a nostalgic preference for it.d. The restaurant offers its milkshakes and fries for a price below the market average.

Answer 1

Answer:

The correct answer is the option C: the restaurant has been around for many years and the customers have a nostalgic preference for it.

Explanation:

It is quite understood that if a restaurant has a wide number of loyal customers due to their brand recognition then that company will ultimately tend to charge a higher price to the customers because of their loyalty. However, this unique situation of loyalty may not explain completely how that business could do it when there are many other competitors around the same region, and therefore that if an explanation must be found to why the company can charge more and still remain competitive then more details of the company's strategy must be revealed.