In a fishery the long-run harvest function (harvest volume) is H(E) = aE - bE2, with a, b representing positive constants and E is fishing effort. Total cost is TC(E) = CE, with e being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish. a) Find the open-access equilibrium values of effort and harvest.
In a fishery the long-run harvest function (harvest volume) is H(E) = aE - bE2, with a, b representing positive constants and E is fishing effort. Total cost is TC(E) = CE, with e being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish.
a) Find the open-access equilibrium values of effort and harvest.
b) Find the fishing effort that maximizes resource rent, EvEy, and the corresponding harvest, HMEY.
c) Find the fishing effort that maximizes sustainable yield (harvest), EMsy.
d) Explain why higher levels of effort (E) beyond a certain point are associated with
reductions in long-run total revenue (TR).
Explain why it generally is not efficiency- maximizing for society to supply the level of fishing effort that maximizes the sustainable yield.
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