Question

Product differentiation in monopolistic competition Consider two gas stations. One is located at a major intersection used by people commuting from populous neighborhoods to jobs located in the downtown area. The other is located on the outskirts of the city. Both gas stations sell high-grade or premium-grade gas for a higher price than low-grade or regular-grade gas. However, the gas station along the more congested route charges higher gas prices for all grades than the station on the outskirts of town. These gas stations offer product differentiation based on which of the following?

A. Quality.
B. Style.
C. Location.
Negative long-run profit can occur as a result of advertising in a monopolistically competitive market.
True
False

Answer 1

A. Quality. and C. Location.

True

Step-by-step explanation:

• High charging means more vehicles will come from that location because your pump is in a congested area, so demand will be higher due to location. Also, there is a difference of merit, one high grade to another and the lowest grade. so correct answer is Quality and Location.
• True, As manufacturing companies in this market are competing, advertising can help increase product prices in the long run. This is not like price constant competition.