Figure 5-15 Figure 5-15 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5-15. The current market equilibrium output is partly the result of overfishing. In that case, what does S₁ represent?

Question

Figure 5-15

Figure 5-15 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5-15. The current market equilibrium output is partly the result of overfishing. In that case, what does S₁ represent?

Quizplus · Accepted Answer

S₁ represents the private marginal cost of harvesting salmon, which does not account for the external costs associated with overfishing.

Figure 5-15 Figure 5-15 Shows the Market for Atlantic