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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,prices charged by firms in the market are likely to:
A)fall in the long run.
B)rise in the long run.
C)remain unchanged.
D)rise dramatically in the long run.

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,prices charged by firms in the market are likely to:
A)fall in the long run. 
B)rise in the long run. 
C)remain unchanged. 
D)rise dramatically in the long run.

Quizplus · Accepted Answer

The market for gas stations is characterized by easy entry and exit, which means that new firms can easily enter or exit the market. This competition among firms results in price competition and pushes prices down. In the long run, this will lead to lower prices for consumers. Therefore, prices charged by firms in the market are likely to fall in the long run.

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