ps5 - of fish where H is the total period 1 harvest and K...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
EC313-Fall 2010 Problem Set 5 (Updated 18 August 2010) Matt Turner When you write up your answers, your goal should be to (1) be correct, and (2) convince your reader that your answer is correct. Answers which do not achieve these goals will not be awarded full credit. To accomplish the second objective, it is helpful if your work is legible and if all steps are presented, possibly with a line of explanation. Problems 1. State the First and Second Welfare theorems. 2. Now consider a fishery consisting of N people, each of whom lives for two days, and a pond. At the beginning of day 2, the pond contains K 2 = ( K 1 - H ) 0.5 pounds
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: of fish, where H is the total period 1 harvest and K t is the stock of fish in period t . Let h i ∈ [ 0,1 ] be the harvest by fisher i in period 1. Harvesting fish is costless. In days 2, all fishers harvest equal shares of the second period stock. If the fishers discount day 2 at the market rate of interest, r , and the price of fish is one, then a profit maximizing fisher chooses h i to solve max h i h i + 1 N K 1-N ∑ j = 1 h j ! 0.5 1 1 + r (a) Solve for the fisher’s choice of h i . (b) Does it make sense for a single individual to buy the whole fishery? 1...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online