"This restaurant is good."
Shouldn't this be このレストランはいいです instead? the way they are wording it makes it seem like the restaurant itself is delicious.
It's important to remember you can't always translate things literally. This is just how it's said in Japanese.
このレストランはいいです sounds more like "this restaurant will do", or "this restaurant is fine/ok".
When you say "this restaurant is good" in English you also don't mean the building is good.
It follows the same rules as Kore, Are, and Sore but is used when the object has an adjective. Which one you use depends on how far away the object is from you and/or your coversation partner. Ko-/this, So-/that, A-/that(over there)
The answer says it would accept このレストはいいです。The problem being is that when I typed that, I hit space, which changed the いい into 良い, which it didn't accept, even though it is the exact same thing (I'm aware 良い CAN also be よい, but it literally isn't in this case).