Refer to the accompanying figure,which shows the market for fish,to answer the following questions.

-If the government sets a quota of 300 pounds of fish caught per day and issues a license that entitles the holder to catch 20 pounds of fish per day,then the value of the license is

Question

Refer to the accompanying figure,which shows the market for fish,to answer the following questions. 
 
-If the government sets a quota of 300 pounds of fish caught per day and issues a license that entitles the holder to catch 20 pounds of fish per day,then the value of the license is

Quizplus · Accepted Answer

With a quota of 300 pounds of fish caught per day, and each license entitling the holder to catch 20 pounds of fish per day, there will be a demand for 300/20 = 15 licenses.

The value of the license is the difference between the price that fishermen are willing to pay for the license and the cost of catching fish without the license.

At a quantity of 300 pounds of fish, the price would be $4. The cost of catching fish without a license would be $2 per pound (the market price minus the $2 per pound fee paid by licenseholders).

Therefore, the value of the license is:

$4 - $2 = $2 per pound

$2 x 20 pounds = $40 per license

$40 per license x 15 licenses = $600

However, the government only issued 15 licenses, so the total value of the licenses is $40 per license x 15 licenses = $600. 
Since fishermen are willing to pay the full price of the license, the government can charge the full value of the licenses, resulting in a total revenue of $600.

But the government wants to limit the total catch to 300 pounds, so it sets a limit of 15 licenses.

Therefore, the value of each license is $40, and the total value of all 15 licenses is $600.

Refer to the Accompanying Figure,which Shows the Market for Fish,to