Step 1: Identify the type of adjective required.
The phrase "in the town" suggests a comparison of the restaurants cost with all other restaurants in the town, indicating the need for a superlative adjective.
Step 2: Recall the rules for forming superlative adjectives.
For most adjectives, the superlative form is created by adding "-est" to the adjective and using "the" before it (if its a single word). For longer adjectives, "the most" is used before the adjective.
Step 3: Apply the rules to the adjective "costly".
"Costly" is a two-syllable adjective ending in "-y". For such adjectives, the "-y" is usually changed to "-i" and "-est" is added. So, the superlative form is "costliest". It requires the definite article "the".
Step 4: Check the options.
(1) a costly: Uses the indefinite article "a" and the base adjective, not superlative.
(2) a costlier: Uses the indefinite article "a" and the comparative adjective.
(3) the costliest: Uses the definite article "the" and the superlative adjective.
(4) None of the above: "the costliest" is a valid option.
Therefore, "the costliest" is the most appropriate option to complete the sentence, indicating that the restaurants cost is higher than all other restaurants in the town.