Given what we know of the Deepwater disaster and the impact on the Gulf Coast ec

Question

Given what we know of the Deepwater disaster and the impact on the Gulf Coast economy and environment, BP had to absorb a number of public relations and economic “hits” to the company for what many would perceive as a lack of effort on their part to stem the leak and to begin immediate cleanup of the affected areas. Let’s say BP instead doubled the amount of air, sea, and engineering assets to provide nearly twice as much support to resolve the problem. Identify the outputs and inputs into the process of providing this “doubled” support. What about constant returns to scale? Does this also apply here? Why or why not?

Explanation / Answer

Assuming BP doubled the amount of air, sea and engineering assets to provide nearly twice s much as support to resolve the problem, the outputs and inputs into the process of providing the doubled support are mentioned below:

Outputs:-

Inputs:

Constant returns to scale cannot be applied here as it involves factors such as the returns/output involves variables such as government actions, public reaction, costs of damage already done, long term health issues which have been caused as a result of the spillover. With respect to the cleaning up part CRS can be applied but the output in our case is economics, politics and environmental damage with many independent variables and hence, it is not possible to narrow it down to the concept of constant returns to scale without the all the details of the case.

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