At a ski resort located over one hour from the nearest largetown, there is only one grocery store and it charges pricesmore than 200 percent above the typical retail prices. In thelong run, we would expect that:
A)another store will open that will charge equally high prices since competition is low.
B)the store will continue to earn high profits even in the long run since the size of the market is small.
C)demand will decrease since people will not want to pay the high prices.
D)another store will open that will charge lower prices.(True Answer )Correct

Question

Quizplus · Accepted Answer

Another store is likely to open that will offer lower prices because the market is underserved, and there is an opportunity for a competitor to enter the market and gain market share by offering more competitive prices. This is a typical response to the high prices charged by a monopoly or monopolistic competitor. As more stores enter the market, prices are likely to decrease until they reach a level that reflects competitive conditions.

At a Ski Resort Located Over One Hour from the Nearest