How does a reduction in the number of fishermen affect the market for capital goods, such as fishing boats, in the fishing sector?

Show Answers

Raises the demand for fishing vessels while lowering the rental prices of these boats.Lowers the demand for fishing vessels and causes an increase in their rental costs.Reduces the marginal product value of fishermen, lowers their wages, and leads to higher employment within the fishing industry.Increases both the demand for fishing vessels and the rental fees for these boats.

Explanation

A decline in the number of fishermen decreases their marginal productivity, which in turn reduces their wages. Contrary to what might be expected, this situation results in increased employment in the fishing industry as the lower wages make hiring more fishermen affordable.