Two Gas Stations Are Located near Each Other and Compete

question 131

Multiple Choice

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?

• A) The location of Frankie's Fast Fuel gives it a certain degree of market power.
• B) The location of Guzzlin' Gas gives it a certain degree of market power.
• C) Because they offer the same brand of gasoline,differentiation is irrelevant.
• D) Frankie's Fast Fuel charges higher prices,which erodes any market power it possesses.
• E) The location of Frankie's Fast Fuel means that it sells an inferior product.

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