Class18_04 - number of boats fishing he cares of the...

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18/04/2008 Class Notes (covers part of Chapter 14 in the textbook) Class Outline Common Resources Common Resources Common resources are goods that are rival and nonexcludable. Examples of these include fish in the ocean and national parks. A problem associated with common resources is that of “overuse”. Example : Suppose there are 8 boats fishing in the ocean. The table below describes the relationship between the number of boats and total catch. # of Boats Total catch Average Catch Marginal Catch 1 1300 1300 1300 2 2500 1250 1200 3 3500 1166.66 1000 4 4300 1075 800 5 4900 980 600 6 5400 900 500 7 5800 828.6 400 8 6000 750 200 The owner of a boat cares of the expected number of fishes caught, given the
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Unformatted text preview: number of boats fishing he cares of the average catch The average catch represents the marginal private benefit! However, an additional boat decreases the average catch The marginal social benefit is given by the marginal catch! Suppose the marginal cost is constant. The market equilibrium is achieved where the marginal private benefit equals the marginal social costs the market equilibrium is not efficient!!! In equilibrium there is overfishing!!! Solutions : 1. Property Rights 2. Quota MSB MB MSC=MC # of boats $ Q* Q e...
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This note was uploaded on 04/29/2008 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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Class18_04 - number of boats fishing he cares of the...

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