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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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- Spring '08
- Externality, Marginal private benefit, average catch