Suppose that the land surrounding a lake is owned by individuals A andB. Both individuals use the lake to earn a living from fishing, where f_A and f_B represent the total amount of fish extracted from the lake from the two individuals. The benefit from each fish is $50 ! f_A !f_B. The marginal cost of fishing for each profit-maximizing individual is $20. How many fish will individual A catch? A) 10 B) 15 C) 20 D) 25 E) 30"

Question

Quizplus · Accepted Answer

The profit-maximizing condition is MR = MC, where MR is the marginal revenue and MC is the marginal cost. The marginal revenue is the change in total revenue divided by the change in quantity, and the marginal cost is the change in total cost divided by the change in quantity. In this case, the marginal revenue is $50 and the marginal cost is $20. Therefore, the profit-maximizing quantity is 10 fish.

Suppose That the Land Surrounding a Lake Is Owned by Individuals