Consider Al's gasoline station, which sells Texaco at a busy intersection along with three other stations selling
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Question:
Consider Al's gasoline station, which sells Texaco at a busy intersection along with three other stations selling Shell, Conoco, and Chevron.
a. Draw the marginal cost, average total cost, demand, and marginal revenue curves for Al's station, assuming that the profit-maximizing price is greater than average total cost.
b. Show Al's profits on the diagram.
c. Explain what would happen in this situation to bring about a long-run equilibrium. Would more stations open, or would some leave?
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