Question

33. Gas’n'Go is one of the 20 gas stations in Lafayette, California. The following diagram shows the demand curve (D), marginal revenue curve (MR), marginal cost curve (MC) and average total cost curve (ATC) for GasN'Go. Assume that the market for gasoline is a monopolistically competitive market.
Part 1: Label all curves and identify and label the initial price (P1) and quantity (Q1).
Part 2: Suppose that the price of oil increases, causing Gas'n'Go's production costs to also increase (oil is a variable cost for Gas'n'Go and assume the change in oil prices has no impact on consumers preferences). Show the impact of the lower cost of gas production on the model. Label any new curve(s) you draw D2, MR2, MC2 or ATC2 as necessary.
Part 3: Identify and label the price (P2) and quantity (Q2).
Extra Credit [2 points]: Given the change in costs, do you expect firms to enter or exit the gasoline market. Explain your answer using economic concepts discussed in

this unit.

DU OL Quantity of gas

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SGaurav DATE 20 me ATC nd M mc- MK _bengan alway

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33. Gas’n'Go is one of the 20 gas stations in Lafayette, California. The following diagram shows the demand curve (D), marginal revenue curve (MR), marginal cost curve (MC) and average total cost...
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