Use the Following to Answer Questions

question 214

Multiple Choice

Use the following to answer questions:
Figure: The Market for Gas Stations
-(Figure: The Market for Gas Stations) Look at the figure The Market for Gas Stations. Assume that the market for gas stations is characterized by many firms, differentiated products, easy entry, and easy exit. The typical gas station will maximize profits at a quantity of:

• A) Q₁.
• B) Q₂.
• C) Q₃.
• D) Not enough information is given to answer the question.

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Definitions:

Binding Price Ceiling

A government-imposed limit on the price of a product or service that is set below the market equilibrium, leading to shortages and a decrease in supply.

Producer Surplus

The difference between the amount that producers are willing and able to sell a good for and the actual amount they receive due to market price.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.

Opportunity Cost

The relinquishment of possible advantages from alternate options upon making a choice.