Ilia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. a. The most likely reason that the price is the same is that _gas stations always make a profit, so they can charge any price they want. _drivers need gas and are willing to pay whatever price a gas station charges. _government regulation requires both gas stations to charge the same price. _consumers view gasoline from different gas stations as perfect substitutes. b. If one station increases its price, _it will be fined by the government. _it will sell more gasoline. _it will make a higher profit. _it will lose customers to the cheaper station across the street.

Ilia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. a. The most likely reason that the price is the same is that _gas stations always make a profit, so they can charge any price they want. _drivers need gas and are willing to pay whatever price a gas station charges. _government regulation requires both gas stations to charge the same price. _consumers view gasoline from different gas stations as perfect substitutes. b. If one station increases its price, _it will be fined by the government. _it will sell more gasoline. _it will make a higher profit. _it will lose customers to the cheaper station across the street.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 15P

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Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. a. The most likely reason that the price is the same is that drivers need gas and are willing to pay whatever price a gas station charges. consumers view gasoline from different gas stations as perfect substitutes. government regulation requires both gas stations to charge the same price. gas stations always make a profit, so they can charge any price they want. b. If one station increases its price, it will make a higher profit. it will lose customers to the cheaper station across the street. it will be fined by the government. it will sell more gasoline.
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Suppose 2 gas stations must post their prices for regular gasoline at 6am each morning and cannot change their price during the day. Each gas station has a choice: charge a relatively “low” price or charge a relatively “high” price. The following shows their profit for the day of each gas station depending upon which price each gas station chooses: Gas Station B Low Price High Price Gas Station A Low Price $2000, $900 $500, $1500 High Price $1200, $1800 $300, $2100 Assume that this is a "one shot" game: Which strategy should Gas Station A choose? Is it a dominant strategy? Explain why or why not. Which strategy should Gas Station B choose? Is it a dominant strategy? Explain why or why not What is the outcome for each Gas Station? How much profits will each Gas Station earn? Explain. Does this game represent a prisoner’s dilemma situation? Why or why not? If the gas stations can talk the night before making their pricing decision and discuss their pricing…
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As you review the Facebook site, you note that packagingfor your company’s bread uses the words “heart-healthy.”Would you bring this to the attention of the marketing groupresponsible for product packaging? Or would you look fora way to obscure the package design online? Defend youranswer.
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Deborah sells bottled water from a small stand by the beach. On the last day of summer vacation, many people are on the beach, and Deborah realizes that she can make a lot more money this day if she hires someone to walk up and down the beach selling water. She finds a college student named Carlos and makes him the following offer: They'll each sell water all day and split their earnings (revenue minus the cost of water) equally at the end of the day. Deborah knows that if they both work hard, Carlos will earn $90 on the beach and Deborah will earn $180 at her stand, so they will each take home half of their total revenue: = $135. If Carlos shirks, he'll generate only $50 in earnings. Deborah does not know that Carlos estimates his personal cost (or disutility) of working hard as opposed to shirking at $25. $90+$180 Once out of Deborah's sight, Carlos faces a dilemma: work hard (put in full effort) or shirk (put in low effort). In terms of Carlos's total utility, it is better for him…