Oligopoly Topic Index

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Consumer Price Index (CPI)

On April 25, 2001 economist R. Preston McAfee provided testimony on the West Coast petroleum market to the Committee on Commerce, Science and Transportation (Subcommittee on Consumer Affairs, Foreign Commerce, and Tourism) of the United States Senate. He noted that "the most significant gasoline problem facing the West Coast is the lack of new refineries. The West Coast market, which largely operates separately from the rest of the country in terms of gasoline production, has a relatively small number of large firms. The fact that the industry is so stable, with no entry and the small number of firms, creates an oligopoly rather than a perfectly competitive market." McAfee also noted that "demand for gasoline is highly inelastic, meaning that small reductions in supply that are not offset by other increases can lead to significant price increases." Thus if the West Coast oil refining oligopoly were to successfully increase prices over time, the result would be an increase in consumer price inflation for West Coast residents.

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