Question 1 The market (inverse) supply and demand functions for fish are given by: pD = 50 – QD ps = 4+2Q$ (a) Find the free market equilibrium quantity and price of fish. Excessive fishing depletes the stock of fish in rivers and lakes, imposing an external cost on people who enjoy

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Question 1
The market (inverse) supply and demand functions for fish are given by:
pD = 50 – Q"
p$ = 4+ 2Q$
(a) Find the free market equilibrium quantity and price of fish.
Excessive fishing depletes the stock of fish in rivers and lakes, imposing an external cost on people who enjoy
recreational fishing. This external cost is larger when the quantity of commercial fishing is greater. Assume
that:
EC = Q
(b) Write down the equation for the Social Marginal Cost in this market, as a function of Q.
(c) Find the socially optimal quantity of fish that should be produced (QB).
(d) What size of a unit tax on (commercially-harvested) fish would make QB the equilibrium quantity?
Transcribed Image Text:Question 1 The market (inverse) supply and demand functions for fish are given by: pD = 50 – Q" p$ = 4+ 2Q$ (a) Find the free market equilibrium quantity and price of fish. Excessive fishing depletes the stock of fish in rivers and lakes, imposing an external cost on people who enjoy recreational fishing. This external cost is larger when the quantity of commercial fishing is greater. Assume that: EC = Q (b) Write down the equation for the Social Marginal Cost in this market, as a function of Q. (c) Find the socially optimal quantity of fish that should be produced (QB). (d) What size of a unit tax on (commercially-harvested) fish would make QB the equilibrium quantity?
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