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Figure: The Market for Gas Stations
-(Figure: The Market for Gas Stations) The figure The Market for Gas Stations 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.

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Use the following to answer questions:
Figure: The Market for Gas Stations 
-(Figure: The Market for Gas Stations) The figure The Market for Gas Stations 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

In a market with many firms, differentiated products, and easy entry and exit, firms will enter if there are profits, driving prices down in the long run until firms earn normal profits.

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