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Figure: The Market for Gas Stations
-(Figure: The Market for Gas Stations)Use Figure: The Market for Gas Stations.The figure shows curves facing a typical gas station in a large town.The market is characterized by many firms,differentiated products,easy entry,and easy exit.If the gas station here is typical,then in the long run,we would expect to observe:
A)a few gas stations leaving the market.
B)new gas stations entering the market.
C)neither entry nor exit.
D)many gas stations leaving the market.

Question

Use the following to answer question:
Figure: The Market for Gas Stations 
-(Figure: The Market for Gas Stations)Use Figure: The Market for Gas Stations.The figure shows curves facing a typical gas station in a large town.The market is characterized by many firms,differentiated products,easy entry,and easy exit.If the gas station here is typical,then in the long run,we would expect to observe:
A)a few gas stations leaving the market. 
B)new gas stations entering the market. 
C)neither entry nor exit. 
D)many gas stations leaving the market.

Quizplus · Accepted Answer

In a market with easy entry and exit, firms can enter or exit the market easily. Thus, if profits are being made, new firms will enter the market to share in the profits. Similarly, if firms are making losses, they will leave the market. Therefore, we would expect to observe new gas stations entering the market in the long run.

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