n 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 e 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).
n 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 e 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).
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter7: Economies Of Scale And Scope
Section: Chapter Questions
Problem 7.3IP
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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 e 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).
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