[dynoman]

You make widgets that the market will buy at $1.00. You have a 50% markup so you make $.50 per widget.

There is heavy demand for widgets and the market is willing to buy them at $10.00. Your cost goes up to $5.00 and you maintain your markup. You make $5.00 a widget.

Increased production doesn't always in increase manufacturering costs, many times it lowers them, thus increasing profits. But what you senario leaves out is competition. This is what is missing in much of today's so called capitalism. In true hands off capitalism it is not just supply vs demand but also *competition* that limits profit - high profit should invite competition. In the "Big Oil" big profit senario this would mean a competitor would built a refinery resulting in the added supply smoothing out supply crunches and the retail price. But that isn't happening is it?

[Proud_texan]

What kills refineries, other than NIMBY and the all seeing all knowing goobermint, is when oil goes to $10 a barrel it's hard to stay in the oil bidness. Try it sometime and see if anybody hands you a crying towel or talks about giving you money because of windfall losses.

Lets say there is no competition. What's your proposed solution?