South-Western College Publishing - Economics  
In Maryland and Virginia, Fishers are Blue….and a Little Crabby as Well
Topic Perfect Competition
Key Words blue crabs, surplus, price, loss minization
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Reference ID: A146223557
News Story

Blue crabs are thriving in Chesapeake Bay, Maryland this year. In a bad year, fishers might bring in total catches of 50 million lbs. This year, they’ve caught upwards of 80 million lbs. With such a huge harvest, prices of the popular seafood have plummeted. Last April, the price of a bushel of crabs ran $30, down from an annual high of $85; this year, the price is $8-10.

Why is this happening? Warm, mild weather has allowed the huge crabs greater opportunity to spawn, and for juveniles to grow. Globalization is another driver of the precipitous price drop: Last year, 46 million pounds of blue crabs were imported from Asia, double what it was the previous year.

The result? In Maryland, only 27 fishing houses remain open, down from 49 only 9 years ago. Virginia is feeling the same pain. Even those fishers who stay in the business are staying out of the water this year, since they can’t afford the cost of fuel for their boats.

Questions
1.

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

2. What must happen for the Virginia fishers to return to the water and fish?
3. What will happen as this market transitions to the long run?
Source “A Glut of Claws.” The Economist. http://www.economist.com. May 25, 2006.
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