Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman 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 socially optimal number of boats that will maximize the profit earned by the fishermen?

Question

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman 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 socially optimal number of boats that will maximize the profit earned by the fishermen?

Quizplus · Accepted Answer

To find the socially optimal number of boats, we need to consider the intersection of the marginal cost (MC) and marginal revenue (MR) curves. Since the fishermen are charged a fee of $50 per boat, the MC of each additional boat is $50. The MR can be calculated by multiplying the price per pound ($1) by the marginal product of fishing, which is the additional pounds of fish caught per hour by adding one more boat. From the table, we can see that the marginal product of fishing decreases as more boats are added, indicating diminishing returns to fishing effort. The marginal product of fishing for the third boat is 40-30=10, and the MR for the third boat is 10*$1=$10. Therefore, the socially optimal number of boats is 3, as this is the point where MC=$50 intersects with MR=$10. Any more boats beyond this point will result in a loss for the fishermen, as the MC will exceed the MR.

Overfishing Along the Coastline of Helsking Village Led the Government