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Question
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. Frankies Fast Fuel is on the interstate access road, directly following an exit ramp. What can you assume about market power?
a. The location of Frankies 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. Frankies Fast Fuel charges higher prices, which erodes any market power it possesses.
e. The location of Frankies Fast Fuel means that it sells an inferior product.
Answer
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