There Is One Gas Station in a Small Rural Town

question 186

Essay

There is one gas station in a small rural town.The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price.If he is correct in this assertion, what must be true about the demand curve for gas at his station?
A.It must be vertical with a price elasticity of zero.
B.It must be vertical with a price elasticity of infinity.
C.It must be horizontal with a price elasticity of zero.
D.It must be horizontal with a price elasticity of infinity.

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Definitions:

Predatory Pricing

A competitive strategy in which a business sets extremely low prices to eliminate competition and monopolize the market.

Bait and Switch

A deceptive marketing strategy where a customer is lured by the advertisement of a low-priced item but then is encouraged to buy a more expensive one.

Caveat Emptor

A Latin phrase meaning "let the buyer beware," indicating that the buyer assumes the risk for the quality of goods purchased, unless protected by warranty.

Former Price Comparisons

A method of evaluating the price history of a product or service to assess its current value.