In a fishery the long-run harvest function (harvest volume) is H(E) = aE – bE², with a, b representing positive constants and E is fishing effort. Total cost is TC(E) = cE, with c being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish. Explain why higher levels of effort (E) beyond a certain point are associated with reductions in long-run total revenue (TR). Explain why it generally is not efficiency- maximizing for society to supply the level of fishing effort that maximizes the sustainable yield.

In a fishery the long-run harvest function (harvest volume) is H(E) = aE – bE², with a, b representing positive constants and E is fishing effort. Total cost is TC(E) = cE, with c being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish. Explain why higher levels of effort (E) beyond a certain point are associated with reductions in long-run total revenue (TR). Explain why it generally is not efficiency- maximizing for society to supply the level of fishing effort that maximizes the sustainable yield.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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