4. The dollar value of fish caught from Lake Spooky is given by f(b) = 1006 56², where b is the number of fishing boats. Fishing boats are costless to buy and operate. What is the optimal tax that the Department of Fish Affairs should impose on fishing boats, so as to avoid the Tragedy of the Commons? (a) $50 per boat (b) $1 per boat (c) $0 per boat (d) $100 per boat

4. The dollar value of fish caught from Lake Spooky is given by f(b) = 1006 56², where b is the number of fishing boats. Fishing boats are costless to buy and operate. What is the optimal tax that the Department of Fish Affairs should impose on fishing boats, so as to avoid the Tragedy of the Commons? (a) $50 per boat (b) $1 per boat (c) $0 per boat (d) $100 per boat

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3 Let the market supply (representing the marginal private cost) have the form: P(Q) = 1 + 3Q, and the inverse market demand (representing the marginal social benefit) has the form: P(Q) = 25 - Q. Suppose that the production of Q is characterized by a negative externality. The magnitude of the externality (marginal damage) is $4 per unit of Q. a) Find the equilibrium price, quantity, consumer surplus, and the producer surplus resulting from an unregulated market in Q. b) Compute the net economic benefit to society which results from an unregulated market in Q. Note: you need to account for the total damages resulting from an externality. c) What is the socially efficient quantity of Q? d) At the efficient allocation, what is the net benefit to society?
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