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

Quizplus · Accepted Answer

S1 represents the private marginal cost of harvesting salmon. This is because it reflects the cost incurred by individual fishermen and firms to catch salmon, without taking into account any external costs or benefits to society as a whole. Since overfishing can lead to a depletion of the resource and harm to the ecosystem, it suggests that the private cost of harvesting salmon is not aligned with the social cost, which would include the negative externalities of overfishing.

Figure 5-15 Shows the Market for Atlantic Salmon,a Common Resource