Suppose that the lobster harvest is unregulated and any person with a lobster boat and some diesel fuel can go offshore,lower a lobster trap,and harvest lobster.As a result,this common resource is overused.Which policy choice might produce the socially optimal lobster harvest?
A) The federal government subsidizes the purchase of lobster boats.
B) The federal government auctions a limited number of licences to harvest lobster.
C) The federal government removes taxes on diesel fuel,which lowers the price of diesel.
D) The U.S.and Canadian governments remove trade barriers,which allows for more trade of products like lobster.

Question

Quizplus · Accepted Answer

Auctioning a limited number of licences to harvest lobster would limit the number of participants in the industry, leading to a reduction in overfishing and a socially optimal harvest. The other policy choices do not address the root cause of the overuse of the common resource and would not necessarily lead to a socially optimal outcome. Subsidizing the purchase of lobster boats would increase the number of participants in the industry, exacerbating the problem of overfishing. Removing taxes on diesel fuel would also encourage more participants to enter the industry, and removing trade barriers would not address the problem of overfishing.

Suppose That the Lobster Harvest Is Unregulated and Any Person