Suppose that a large rogue wave destroys the (thankfully unoccupied) fleet of swordfish fishing boats docked in the Gloucester, Massachusetts harbor. What happens to the earnings of fishermen and women in Gloucester?
A)The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall.
B)The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall.
C)The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise.
D)The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise.

Question

Quizplus · Accepted Answer

With a decrease in the supply of fishing boats, the marginal productivity of the remaining fishermen and women will decrease, as they will have to work with less capital. Therefore, the equilibrium wage in the market will fall.

Suppose That a Large Rogue Wave Destroys the (Thankfully Unoccupied)