BA540 Managerial Economics
Skousen, M. (2013). Economic Logic. Fourth Edition. Regnery Publishing
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Price Increases and Property Tax – 250 words
Problem 4 in the “Problems to Ponder” section at the end of chapter 9 asks about the oil price increase from 1973-1980. We have also seen this in 2005 and 2010, although not as dramatic a price increase. Please answer the questions in this problem. Discuss.
Problem #4 – When oil prices increased 10 fold during the 1973-80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy? (Hint: Could additional oil revenue be used to explore and develop new oil fields?)