Hale's One Stop and Auto Service Competes with Murray's Gas $\iff$

question 22

Essay

Hale's One Stop and Auto Service competes with Murray's Gas Mart. The local demand is:
Q^d = 25 - 10P $\iff$ P = 2.50 - 0.1 Q^d. Both firms sell exactly the same quality of gasoline. Thus, if the firms charge a different price, the lower price firm will capture the entire market share. If the firms charge the same price, they will split the market share. The marginal cost functions are both constant at $1.25. If the firms compete by setting price, what is the market output level? What is the market price level?

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Definitions:

Standard Of Care

The level of care and attention expected of a person or organization in carrying out activities, especially to avoid harm to others.

Tort Action

A lawsuit or legal action based on civil wrongs not arising from contracts, which can lead to a remedy in the form of damages or other relief.

Store Detective

An individual employed by a retail establishment to prevent theft by detecting and apprehending shoplifters.

False Imprisonment

The act of restraining a person's freedom of movement without lawful justification.