U.S. Highway 12 is part of a crucial two-lane artery from the seaports in Washington State to the tar sands in Canada. Extracting oil from the tar sands requires very large equipment and transporting it takes up both lanes of U.S. Highway12. In August of 2010, Idaho granted ConocoPhilips a road permit that allowed it to transport four oil-processing units. Without this permit, ConocoPhilips would have had to transport those units a much longer distance to get them to their destination. If permits for this highway were not allowed, how would that affect the elasticity of which curve in the market for oil?
A) The supply curve would become more elastic.
B) The supply curve would become less elastic.
C) The demand curve would become more elastic.
D) The demand curve would become less elastic.

Question

Quizplus · Accepted Answer

If permits for this highway were not allowed, it would make it more difficult and costly for oil companies to transport their equipment and extract oil from the tar sands. This would decrease the quantity of oil supplied in the market, making the supply curve less elastic.

US Highway 12 Is Part of a Crucial Two-Lane Artery