The problem below asks about the oil price increase from


The problem below 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: 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. 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?)

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