Because producing more oil requires a significant increase in exploration and drilling costs, the supply curve for oil is:
A) relatively elastic.
B) relatively inelastic.
C) perfectly elastic.
D) unit elastic.

Question

Quizplus · Accepted Answer

The fact that producing more oil requires a significant increase in exploration and drilling costs implies that the supply of oil is relatively inelastic. This is because even if the price of oil were to increase significantly, it would take time and a substantial initial investment to increase the amount of oil that can be supplied. Therefore, producers may not be able to increase the quantity of oil supplied as much in response to a price increase, indicating that the supply curve is relatively inelastic.

Because Producing More Oil Requires a Significant Increase in Exploration