Consider a fishery where the harvest rate is related to effort: H= a/b E - 1/b E^2 and total cost of effort is: TC = cE E relates to the stock level, S, in the following way: E= a - bS Let a = 20, b = 0

Subject:EconomicsPrice:3.87 Bought7

Share With

Consider a fishery where the harvest rate is related to effort:

H= a/b E - 1/b E^2

and total cost of effort is: TC = cE

E relates to the stock level, S, in the following way: E= a - bS

Let a = 20, b = 0.2 and c = $20. Assume a competitive market price of fish to be $10 per ton.

a) Find the open-access equilibrium value of effort and harvest. 

b) Find the fishing effort that maximizes resource rent, EMEY, and the corresponding harvest, HMEY.

c) Find the fishing effort that maximizes sustainable yield, EMSY. 

d) Under what circumstances would a price increase lead to an elimination of the stock in this fishery? Explain. 

e) Suppose a management council decides to regulate this fishery for the first time. The management council is considering two alternative policies: a tax on the fish catch, and freely allocated individual transferable quotas (ITQs). Compare the impact of the two policies on (i) total social surplus generated by the fishery and (ii) profits to owners of the fishing enterprises in the fishery.