Table 17-2.The table shows the town of Pittsville's demand schedule for gasoline.For simplicity,assume the town's gasoline seller(s)incur no costs in selling gasoline.

-Refer to Table 17-2.Suppose there are exactly two sellers of gasoline in Pittsville: Exxoff and BQ.Currently,Exxoff sells 300 gallons and BQ sells 400 gallons.Which of the following statements is correct? (Hint: Perform simple interpolation between rows of the chart where necessary. )

Question

Table 17-2.The table shows the town of Pittsville's demand schedule for gasoline.For simplicity,assume the town's gasoline seller(s)incur no costs in selling gasoline.
 
-Refer to Table 17-2.Suppose there are exactly two sellers of gasoline in Pittsville: Exxoff and BQ.Currently,Exxoff sells 300 gallons and BQ sells 400 gallons.Which of the following statements is correct? (Hint: Perform simple interpolation between rows of the chart where necessary. )

Quizplus · Accepted Answer

Currently, Exxoff sells 300 gallons and BQ sells 400 gallons, making a total of 700 gallons sold in Pittsville. The market price is $2.80 per gallon.

If Exxoff increases its output to 400 gallons, the market supply would increase, and the price would fall to $2.60 per gallon, reducing the profit per gallon for both sellers.

If BQ decreases its output to 350 gallons, the market supply would decrease, and the price would rise to $2.90 per gallon, increasing the profit per gallon for both sellers.

Therefore, the current situation is not a Nash equilibrium, as indicated by the fact that BQ's profit would increase if it decreased its output to 350 gallons and Exxoff kept its output at 300 gallons.