Phil's filling station gas station operates on a patch on the highway in a patch where there were no gas stations close by.It enjoyed high profits.After a while,Glen's gas another gas station opened up close by.The profits for the first gas station are likely to decrease because
A)it has to lower prices,since its product is now more price elastic
B)It has to lower prices since its product is now more price inelastic
C)due to the increased availability of substitutes
D)both A&C

Question

​Phil's filling station gas station operates on a patch on the highway in a patch where there were no gas stations close by.It enjoyed high profits.After a while,Glen's gas another gas station opened up close by.The profits for the first gas station are likely to decrease because
A)​it has to lower prices,since its product is now more price elastic
B)It has to lower prices since its product is now more price inelastic
C)due to the increased availability of substitutes
D)​both A&C

Quizplus · Accepted Answer

Phil's filling station's profits are likely to decrease because it has to lower prices since its product is now more price elastic due to the increased availability of substitutes, which is Glen's gas station. This increased competition makes consumers more sensitive to price changes, as they now have an alternative option.

​Phil's Filling Station Gas Station Operates on a Patch on the Highway

Phil's Filling Station Gas Station Operates on a Patch on the Highway