A firm has contracted to supply 500,000 gallons of propane fuel for $1.49 million to the local council. The council wants to break the contract. What does the minimum current market price of propane need to be in order for the firm to benefit from breaking the contract?

Question

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The firm is contracted to supply propane at $1.49 million for 500,000 gallons, which is $2.98 per gallon. To benefit from breaking the contract, the market price must be greater than $2.98 per gallon.

A Firm Has Contracted to Supply 500,000 Gallons of Propane