Question

Suppose a gasoline station offers the following promotion on Canada Day: “TODAY ONLY: FREE GASOLINE FROM...

Suppose a gasoline station offers the following promotion on Canada Day:
“TODAY ONLY: FREE GASOLINE FROM NOON UNTIL 3:00 P.M.! HAPPY
BIRTHDAY, CANADA!” Is that gasoline a free good to the owner of the station?
Is it a free good for all the drivers who wait in long lines to fill up? Countless others
might decide to avoid the “free” gas and fill up at other stations that charge $4.00

per gallon. In your opinion, are they foolish to pass up the opportunity? In the
economic way of thinking, would they be failing to economize?

Homework Answers

Answer #1

Is that gasoline a free good to the owner of the station?

No, every good usually has some explicit cost. This will cost the owner

Is it a free good for all the drivers who wait in long lines to fill up?

No, not necessarily, waiting in line may have opportunity costs for some drivers.

Countless others might decide to avoid the “free” gas and fill up at other stations that charge $4.00 per gallon. In your opinion, are they foolish to pass up the opportunity?In theeconomic way of thinking, would they be failing to economize?

No they are not foolish. For anyone who is facing a an economic loss greater than $4, it is better for them to pay the price and not wait.

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