Oftentimes, gas stations a couple of miles apart will differ in price by as much as 5 to 10 cents per gallon because oil companies use a pricing system called zone pricing. For example, gas is sold wholesale to stations in Pleasanton, California, at about a 13 percent discount from the wholesale price in nearby Palo Alto.
a. Why might oil companies do this?
b. The FTC has been reviewing the practice. What policies might you suggest for them to consider to stop the practice, and what are the potential problems with those policies?
c. Would such a policy lower the overall price of gas?
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