question archive Consider a salmon fishery with two fishermen named A and B
Consider a salmon fishery with two fishermen named A and B
Subject:EconomicsPrice: Bought3
Consider a salmon fishery with two fishermen named A and B. Suppose that the marginal benefit for both fishermen is $120 per ton. The marginal cost of fishing for each fisherman is given by:
MCA = 30+3qA
MCB = 20+ qB
a Calculate the efficient catch for each fisherman if there were no limits to fishing.
b Calculate the marginal net benefit for each fisherman.
c Suppose the fishery imposes a system of Individual Transferable Quotas (ITQs) with a total allowable catch of 100 tons of salmon. Calculate the efficient allocation of quotas for each fisherman.
d Now assume that of the total ITQ of 100 tons, Fisherman A was initially allocated 60 tons while Fisherman B was allocated 40 tons. Would you expect the two fishermen to trade part of their quotas? If no, why not? If yes, who would trade what amount?
