Below is an excerpt from the Wall Street Journal article How Americas Largest Restaurant Franchisee Decides When to Raise Prices by Heather Haddon, May $21,2023.$A team of scientists uses reams of data to track and recommend price changes for the largest U$.$S$.$ restaurant franchisee. The Flynn Restaurant Group owns over $2,350$ restaurants, including Applebees, Taco Bell, Panera Bread, Arbys, Wendys, and Pizza Hut chains. Data scientists collect prices for menu items across Flynns restaurants and use other variables to recommend price changes. The recommendations are based on prices charged by competing restaurants within a three$-$mile radius of Flynn stores.When McDonalds restaurants last year raised soft$-$drink prices, many diners bemoaned the loss of the chains long$-$running $$1$ drinks deal. At Flynn Restaurant Group, Ashley Fenn started running numbers. Fenn and her team of data scientists decided Flynns Wendys locations in Delaware, Maryland and Virginia could bump up their own drink, fry, and dessert prices and not risk losing customers to rival McDonalds stores. After determining that the move helped cover costs without dragging down customer counts, the restaurants slightly increased drink prices again this year, executives said. San Francisco$-$based Flynn$,$ considered the largest U$.$S$.$ restaurant franchisee with more than $$4$ billion in annual sales, is harnessing reams of internal and competitor data to take a more surgical approach to selling fast food and sit$-$down meals.The companys two$-$year$-$old data team has sought to better track what competitors are charging. And as inflation wears on consumers, Flynn is also studying whether prices can come down for certain items without hurting profit. It speaks to the growing sophistication of our business. Theres a lot of money at stake, said Greg Flynn$,$ who owns more than $2,350$ restaurants spanning Applebees, Taco Bell, Panera Bread, Arbys, Wendys, and Pizza Hut chains. Many restaurants increased their prices three to five times last year, up from a typical two to three cost hikes annually, according to industry consulting firm Revenue Management Solutions. Fast$-$food prices were up $8\mathrm{.}2\%$ in April compared with last year, outpacing annual inflation at grocery stores for the first time since early $2022,$ according to the Labor Department. Many restaurant chains say they are planning to further increase menu prices this year as inflation persists. Some chain executives have warned that consumers might have a harder time bearing price increases later in the year, with an economic downturn looming.Retailers have long employed sophisticated data tools to study the impact of pricing, built with data gathered from frequent checkout$-$counter purchases and from prices posted online. Hotels and airlines for decades have crunched numbers to help set prices for individual markets and adjust them based on demand. Restaurant operators have traditionally lagged behind other industries in integrating data to help set prices, as their customers dont come as frequently as they do to grocery stores, industry executives said. To assess competitors prices, restaurant owners typically visited other area restaurants and usually raised their own prices once or twice a year across multiple locations. We had local marketing teams that would go out and steal all the menus and enter them into an Excel file, said Ron Bellamy, Flynns chief operating officer.In $2019,$ as Flynns restaurant holdings grew, executives discussed how they could build a better system to guide their restaurant managers on prices. The pandemic put the work on pause, but as sales started to stabilize in $2021,$ Flynn began to put together a business analytics arm in its support center outside of Cleveland. Flynn that year hired Fenn, who earned a Ph$.$D$.$ in neuroscience and was working in consulting at McKinsey. They recruited other industry pricing and marketing specialists to build a nine$-$person team. Flynn invested in computer servers to warehouse reams of data. Data scientists collected prices for individual items across Flynns restaurants, then layered them on variables that could impact sales, such as bad weather or a change in restaurant hours. They began regularly monitoring prices for competitor restaurants within a three$-$mile radius of their stores.Pandemic$-$driven growth in online ordering helped the effort, Mr$.$ Bellamy said, making more of rivals menus publicly available and allowing Flynn to monitor prices down to individual items sold by a chain and across different markets. The data team discovered instances when Flynns restaurant managers had boosted prices too much for individual items or too little compared with other types of food. At Flynns roughly $290$ Taco Bell restaurants, for example, some stores had increased prices for the brands popular Doritos Locos Tacos by around a dollar more than the regular version, and some customers were starting to resist, executives said. The team advised managers to stop raising prices on that item. The data team also found that prices at hundreds of Pizza Hut restaurants acquired by Flynn in $2021$ trailed competitors in many of their markets. Restaurant managers have since lifted pizza prices by small increments to try to help cover costs without turning customers away, executives said.Flynn now gets monthly reports on the pricing moves of its competitors, which it uses to inform its own restaurant menus, executives said. It has developed dozens of levels of pricing for its brands tailored to individual geographies. Mr$.$ Bellamy said he hopes the team can eventually provide pricing suggestions down to an individual restaurant. After reading the summary above, answer the following questions $(2$ X $5=10$ points$).1.$ What are the characteristics of a monopoly? What causes monopolies to arise? $2.$ What is price discrimination? What are the conditions required for successful price discrimination by a firm? $3.$ What is arbitrage? Briefly explain why arbitrage can prevent firms from benefiting from price discrimination. $4.$ Assume that a firm uses big data to estimate the price elasticity of demand for two different groups of consumers who buy its product. The price elasticity of demand for the first group is estimated to be $-1\mathrm{.}5$ and the price elasticity of demand for the second group is estimated to be $-0\mathrm{.}6.$ To increase the firms revenue which group should be charged a higher price? $5.$ From the article: $[$Ashley$]$ Fenn and her team of data scientists decided Flynns Wendys locations in Delaware, Maryland and Virginia could bump up their own drink, fry and dessert prices and not risk losing customers to rival McDonalds stores. Assume that Wendys restaurants in Delaware did lose customers to McDonalds restaurants after they increased prices for their drinks, fries, and desserts. Explain how Wendys restaurants total revenue could still increase from the price increases. $2$