Large barriers to entry in the gas station business explain why the two only gas stations in a small town:
A)can earn an economic profit in the long run.
B)must produce at the minimum average total cost in the long run.
C)have no fixed costs in the long run.
D)must produce a level of output such that MR = MC to maximize their profit.

Question

Quizplus · Accepted Answer

The presence of large barriers to entry in the gas station business implies that it is difficult for new firms to enter and compete in the market. This gives the existing gas stations some degree of market power, allowing them to charge prices higher than their average total cost in the long run and earn an economic profit.

Large Barriers to Entry in the Gas Station Business Explain