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

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

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
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