Review Response Generator

Yes, briefly. Responses show prospective customers that someone is paying attention, and a short specific reply reads better than a long generic one. Two lines is plenty.

Publicly, calmly, and without relitigating it. The reply is not aimed at the reviewer, who has already made their mind up. It is aimed at the next person reading, who is deciding whether you seem reasonable.

Not in the public reply. It makes you look more interested in your rating than the problem. Fix the issue first, and if they choose to update it themselves, that carries far more weight.

You can report it to Google if it breaches their policy, for example if it is not from a real customer or contains abuse. Removal is not guaranteed and it can be slow, so responding well in the meantime matters.