Figure 5.7

Figure 5.7 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 5.7.The current market equilibrium output is partly the result of overfishing.In that case, what does S₁ represent?

Question

Figure 5.7
  
Figure 5.7 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 5.7.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, as it reflects the costs incurred by individual fishermen without accounting for the external costs of overfishing on the environment and society.

Figure 5.7 Figure 5.7 Shows the Market for Atlantic Salmon, a Common