Two gas stations are located near each other and compete for customers.They both offer the same brand of gasoline.Guzzlin' Gas is located a couple of blocks from the interstate,down a side street.Frankie's Fast Fuel is on the interstate access road,directly following an exit ramp.What can you assume about market power?

Question

Quizplus · Accepted Answer

The location of Frankie's Fast Fuel on the interstate access road, directly following an exit ramp gives it a certain degree of market power compared to Guzzlin' Gas that is located down a side street a couple of blocks away from the interstate. Being on the interstate access road provides Frankie's Fast Fuel with high visibility to potential customers who are looking for a gas station to refill their cars, giving it a competitive advantage over Guzzlin' Gas.

Two Gas Stations Are Located near Each Other and Compete