Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing. The fishermen were charged $50 on each boat they sent out for fishing. The following table shows the total pounds of fish caught per hour and the number of boats used for fishing.Table 13.2

-Refer to Table 13.2. Suppose fish sells for $1 per pound. What is the amount of total profit earned when the fishermen use the socially optimal number of boats?

Question

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing. The fishermen were charged $50 on each boat they sent out for fishing. The following table shows the total pounds of fish caught per hour and the number of boats used for fishing.Table 13.2
 
-Refer to Table 13.2. Suppose fish sells for $1 per pound. What is the amount of total profit earned when the fishermen use the socially optimal number of boats?

Quizplus · Accepted Answer

To find the socially optimal number of boats, we need to find the point where the marginal cost (MC) equals the marginal revenue (MR) of fishing. Looking at the table, we can calculate the marginal revenue of fishing as follows:

Marginal Revenue = Change in Total Revenue/Change in Quantity of Fish
MR = ($1 x 50 lbs) - ($1 x 40 lbs) = $10

Now, let's calculate the marginal cost of fishing:

Marginal Cost = Change in Total Cost/Change in Quantity of Fish
MC = ($50/2 boats) / (45 lbs - 40 lbs) = $5

Since MC is less than MR, the fishermen should use more boats to increase their profit. The socially optimal number of boats is therefore 3, since adding more boats after that point would result in decreasing profits.

Using 3 boats, the total cost would be $50 x 3 = $150 ($50 per boat), and the total revenue would be $1 x 105 lbs = $105. Therefore, the total profit earned would be $105 - $150 = -$45. However, since we are asked for the total amount of profit earned and not just the profit from fishing, we need to subtract the fee of $50 charged on each boat, resulting in a final profit of $105 - $150 - ($50 x 3) = $80. Therefore, the correct answer is (B).

Overfishing Along the Coastline of Helsking Village Led the Government