Wednesday, April 19, 2006

Economics Quiz

Over at Econball, my good friend Dave B posts the latest scheme to lower gas prices circulating via the internet:

"For the rest of this year, DON'T purchase ANY gasoline from the two biggest companies (which now are one), EXXON and MOBIL. If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. "

Quiz for economics students, what assumptions must be true for this strategy to actually work?

Here's the answer --

For this argument to be true, we must assume that we live in a magical fairy land where basic economic principles do not apply.
Good one Bryce.
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