Answer to Question #278647 in Microeconomics for SharpenCui

Question

Whaling was the chief occupation of New Bedford, Massachusetts, in the early nine

teenth century. Much whaling labor was highly skilled and the labor all lived in New

Bedford. Suppose that the market for whaling labor was competitive initially.

(a) True or False: If the owners of whaling ships in New Bedford band together to set

up a central hiring hall, the employment of whaling labor will fall and the income

of the owners will rise.

(b) True or False: If the owners now charge to each laborer a personal fee for entrance

to the hiring hall, their income will rise still further and employment will rise back

to the competitive level.

Answer 1

(a) True, Whaling workforce recruitment will reduce and the owners' earnings will grow if the owners of whaling ships in New Bedford combine together to establish a consolidated hiring hall.

(b) False, If the owners now charge each employee a personal fee to enter the hiring hall, their earnings will increase even more, and employment will return to a competitive rate.