What will happen to the long-run aggregate supply curve

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In 2010, the Obama administration implemented more restrictive regulation of oil exploration and production in the areas just offshore of the United States. The cost of drilling offshore oil wells is likely to increase significantly as a result. Based on current assessments of these areas there are an estimated 18 billion barrels of oil there. As a result of the environmental catastrophe associated with the British Petroleum oil spill in the Gulf of Mexico there has been a considerable controversy about developing these oil resources. Environmentalists argue that the effect on a fragile ocean ecosystem makes drilling and pumping oil from these locations too costly. Thus they strongly oppose drilling there.

(A) What will happen to the long-run aggregate supply curve (LRAS) as a result of the implementation of these more restrictive regulations on drilling for offshore oil?

Reference no: EM13996828

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