Author Question: Over-fishing of common fishing grounds happens because fishing grounds are a common property and ... (Read 140 times)

chads108

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Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.
 
  Indicate whether the statement is true or false

Question 2

Suppose a city has 20 citizens. The first 10 citizens each derive marginal benefit from traffic lights according to the function MB = 10 - Q, and the remaining 10 citizens each derive marginal benefit from traffic lights according to the function MB = 20 - Q. If traffic lights cost 20 each to produce, what is the efficient quantity of traffic lights?
 
  A) 14 traffic lights
  B) 16 traffic lights
  C) 12 traffic lights
  D) 9 traffic lights


Jadwiga9

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Answer to Question 1

False. It is the fact that social and private incentives diverge that creates the problem. The profit-maximizing quantity of fish for the fishermen exceeds the social optimal quantity of fish that will maintain the stock. Over-fishing (and maybe extinction) will result.

Answer to Question 2

A



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