Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterises the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, as demand increases, firms are incentivized to increase their output in order to maximize profits. However, in the case of the tuna fishing industry, as fishing boats have to travel farther into the ocean to harvest tuna, it becomes more expensive to produce each unit of output. This is because the cost of fuel, labor, and other inputs required for fishing increases with distance. Therefore, the industry experiences increasing costs as output increases, making option B the best choice.

Assume That the Tuna Fishing Industry Is Perfectly Competitive