Question

In the summer of​ 2012, due to plentiful​ lobsters, the price of lobster in Maine fell to​ $1.25 a​ pound, which was​ 70% below normal and nearly a​ 30-year low. According to Bill​ Adler, head of the Massachusetts​ Lobstermen's Association,​ "Anything under​ $4 [a​ pound], lobstermen​ can't make any​ money" (Jerry A. Dicolo and Nicole​ Friedman, "Lobster Glut Slams​ Prices," Wall Street Journal​, July​ 16, 2012). At least 30 boats announced that they would stay in port until the price rose. ​ However, Canadian and other U.S. fishers continued to harvest lobsters. Why did some lobster boats stop fishing while others​ continued? Some boats stopped fishing in the short run while others continued fishing because​ (unlike the boats that continued​ fishing) the boats that stopped fishing

Answer 1

Answer: experienced increasing marginal and variable production cost.

Explanation: Variable cost are cost that varies with production output the higher the output the more variable cost increase unlike marginal cost with increases cost the moment an additional unit is produced. The boats that stopped fishing experienced an increase in marginal and variable production cost due to the price not covering their variable cost this meant they were at risk of running at a loss.