Currently, Texas Tea Oil Co. is the only local supplier of home heating oil in Frigid, Alaska.

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Currently, Texas Tea Oil Co. is the only local supplier of home heating oil in Frigid, Alaska. This winter, residents were shocked that the price of a gallon of heating oil had doubled and believed that they were the victims of market power. Explain which of the following pieces of evidence support or contradict that conclusion.

a. There is a national shortage of heating oil, and Texas Tea could procure only a limited amount.

b. Last year, Texas Tea and several other competing local oilsupply firms merged into a single firm.

c. The cost to Texas Tea of purchasing heating oil from refineries has gone up significantly.

d. Recently, some nonlocal firms have begun to offer heating oil to Texas Tea’s regular customers at a price much lower than Texas Tea’s.

e. Texas Tea has acquired an exclusive government license to draw oil from the only heating oil pipeline in the state.

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Essentials Of Economics

ISBN: 9781319221317

5th Edition

Authors: Paul Krugman, Robin Wells

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