Most likely a decrease in the legal drinking age means an increase in the number of customers patronizing bars, or a shift out in demand in the short run, leading to increased sales, prices and profitability as shown in the graph to the right. The green shaded area is the profit now being earned.

8.Suppose we imagine that bars in Madistin can be characterized as a monopolistically competitive industry with free entry. Suppose that the legal drinking age is lowered to 19. Our best short run prediction is that: (Unfortunately there seems to be evidence that such changes lead to increased numbers of alcohol related highway deaths)

1. bars will increase prices to keep out the new drinkers. While it is true that prices will increase, it will not be for this reason. Instead prices rise due to the increase in demand.
2. bars will experience a reduction in profit due to the increased costs of serving more patrons. Even though costs increase due to the number of patrons, bars are free to price so that no drinks are sold at prices such that marginal revenue is below marginal cost.
3. bars will become more profitable due to the increase in demand.
4. more bars will be opened. This will occur in the long run, but this question specifically asks about the short run, (a caution to read carfully).
5. many bars will close. With increasing demand and in short run time there is no way this could occur.