The Hull Petroleum Company and Inverted V are retail gasoline franchises that co

Question

The Hull Petroleum Company and Inverted V are retail gasoline franchises that compete in a local market to sell gasoline to consumers. Hull and Inverted V are located across the street from each other and can observe the prices posted on each other’s marquees. Demand for gasoline in this market is Q = 50 -6P, and both franchises obtain gasoline from their supplier at $4.20 per gallon. On the day that both franchises opened for business, each owner was observed changing the price of gasoline advertised on its marquee more than 10 times; the owner of Hull lowered its price to slightly undercut Inverted V’s price, and the owner of Inverted V lowered its advertised price to beat Hull’s price. Since then, prices appear to have stabilized. Under current conditions, how many gallons of gasoline are sold in the market, and at what price?

Instructions: Enter your responses rounded to the nearest two decimal places.

Gallons sold: ___

Price: $ ___

How would prices differ if Hull had service attendants available to fill consumers’ tanks but Inverted V was only a self-service station?

a. Price will not change.

b. Price will go up.

c.Price will go down.

Explanation / Answer

Price miust be equal to MC = $4.20 .Since both are selling homogenous good ND ARE COMPETING IN PRICES.

Quantity sold =50-6*(4.2) =24.8 gallons . Each selling 12.4 gallons.

Prices will go up as there will be a higher demand for self serviceone

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.