Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 18: Problem 11

Reconsider the common resource problem given in Example \(18.7 .\) Suppose that crawfish popularity continues to increase, and that the demand curve shifts from \(C=0.401-0.0064 F\) to \(C=0.50-0.0064 F\) How does this shift in demand affect the actual crawfish catch, the efficient catch, and the social cost of common access? (Hint: Use the marginal social cost and private cost curves given in the example.)

Short Answer

Expert verified
This shift in demand leads to an increase in both the actual and efficient crawfish catch, due to higher willingness to pay. However, it also generates a larger social cost due to overconsumption.

Step by step solution

01

Understanding the initial demand price function and quantity function

The initial demand function for crawfish was \(C=0.401-0.0064F\), where C is the price of crawfish and F is the number of crawfish caught.
02

Understanding the new demand function

Due to an increase in popularity, the demand curve shifts upwards to \(C=0.50-0.0064F\). This suggests that the price people are willing to pay for crawfish has increased, while the quantity demanded decreases with F.
03

Calculating changes in crawfish catch

To find the actual catch, this will be where the new demand equals to the private cost. Equate both equations given in the example and solve for F.
04

Efficient Catch Calculation

The efficient catch is where demand equals to the social cost. Equate the given social cost equation to the new demand equation and solve for F.
05

Impact on the social cost

The social cost can be found by comparing the actual catch and the efficient catch. The increased demand curve means people are willing to pay more for the same quantity, implying an increased consumption which leads to an increase in social cost.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Medical research has shown the negative health effects of "secondhand" smoke. Recent social trends point to growing intolerance of smoking in public areas. If you are a smoker and you wish to continue smoking despite tougher anti- smoking laws, describe the effect of the following legislative proposals on your behavior. As a result of these programs, do you, the individual smoker, benefit? Does society benefit as a whole? a. A bill is proposed that would lower tar and nicotine levels in all cigarettes. b. A tax is levied on each pack of cigarettes. c. \(A\) tax is levied on each pack of cigarettes sold. d. Smokers would be required to carry governmentissued smoking permits at all times.

A computer programmer lobbies against copyrighting software, arguing that everyone should benefit from innovative programs written for personal computers and that exposure to a wide variety of computer programs will inspire young programmers to create even more innovative programs. Considering the marginal social benefits possibly gained by this proposal, do you agree with this position?

A number of firms have located in the western portion of a town after single- family residences took up the eastern portion. Each firm produces the same product and in the process emits noxious fumes that adversely affect the residents of the community. a. Why is there an externality created by the firms? b. Do you think that private bargaining can resolve the problem? Explain. c. How might the community determine the efficient level of air quality?

The Georges Bank, a highly productive fishing area off New England, can be divided into two zones in terms of fish population. Zone 1 has the higher population per square mile but is subject to severe diminishing returns to fishing effort. The daily fish catch (in tons) in Zone 1 is $$F_{1}=200\left(X_{1}\right)-2\left(X_{1}\right)^{2}$$ where \(X_{1}\) is the number of boats fishing there. Zone 2 has fewer fish per mile but is larger, and diminishing returns are less of a problem. Its daily fish catch is \\[ F_{2}=100\left(X_{2}\right)-\left(X_{2}\right)^{2} \\] where \(X_{2}\) is the number of boats fishing in Zone \(2 .\) The marginal fish catch MFC in each zone can be represented as \\[ \begin{array}{l} \mathrm{MFC}_{1}=200-4\left(X_{1}\right) \\ \mathrm{MFC}_{2}=100-2\left(X_{2}\right) \end{array} \\] There are 100 boats now licensed by the U.S. government to fish in these two zones. The fish are sold at \(\$ 100\) per ton. Total cost (capital and operating) per boat is constant at \(\$ 1000\) per day. Answer the following questions about this situation: a. If the boats are allowed to fish where they want, with no government restriction, how many will fish in each zone? What will be the gross value of the catch? b. If the U.S. government can restrict the number and distribution of the boats, how many should be allocated to each zone? What will be the gross value of the catch? Assume the total number of boats remains at 100 c. If additional fishermen want to buy boats and join the fishing fleet, should a government wishing to maximize the net value of the catch grant them licenses? Why or why not?

Four firms located at different points on a river dump various quantities of effluent into it. The effluent adversely affects the quality of swimming for homeowners who live downstream. These people can build swimming pools to avoid swimming in the river, and the firms can purchase filters that eliminate harmful chemicals dumped in the river. As a policy adviser for a regional planning organization, how would you compare and contrast the following options for dealing with the harmful effect of the effluent: a. An equal-rate effluent fee on firms located on the river. b. An equal standard per firm on the level of effluent that each can dump. c. A transferable effluent permit system in which the aggregate level of effluent is fixed and all firms receive identical permits.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free