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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.
- Spring '08