1. Can we safely argue that the market for blue crabs is perfectly competitive? Why or why not?

Depends. Focus on whether suppliers are producing a homogeneous good, and whether they are individually too small to influence price. The number of fishing houses in the U.S. has fallen by half, but we have to also allow for imports, which are now a factor.

2. What must happen for the Virginia fishers to return to the water and fish?

Price of blue crabs must rise (increasing MR curve for the fishers), or they must become more fuel-efficient (reducing MC curve for the fishers).

3. What will happen as this market transitions to the long run?

Firms that remain have an incentive to become more and more efficient, reducing their costs, increasing their profit. Eventually, firms will enter (leave) until the point where economic profits (losses) are zero.

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