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 in order 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 the market and compete with the existing firms. This gives the two gas stations in the small town a degree of market power, allowing them to earn an economic profit in the long run.

Large Barriers to Entry in the Gas Station Business Explain