Question 1 The market (inverse) supply and demand functions for fish are given by: pD = 50 – QD ps = 4+2Q$ (a) Find the free market equilibrium quantity and price of fish. Excessive fishing depletes the stock of fish in rivers and lakes, imposing an external cost on people who enjoy

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter12: Environmental Protection And Negative Externalities
Section: Chapter Questions
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Question 1
The market (inverse) supply and demand functions for fish are given by:
pD = 50 – Q"
p$ = 4+ 2Q$
(a) Find the free market equilibrium quantity and price of fish.
Excessive fishing depletes the stock of fish in rivers and lakes, imposing an external cost on people who enjoy
recreational fishing. This external cost is larger when the quantity of commercial fishing is greater. Assume
that:
EC = Q
(b) Write down the equation for the Social Marginal Cost in this market, as a function of Q.
(c) Find the socially optimal quantity of fish that should be produced (QB).
(d) What size of a unit tax on (commercially-harvested) fish would make QB the equilibrium quantity?
Transcribed Image Text:Question 1 The market (inverse) supply and demand functions for fish are given by: pD = 50 – Q" p$ = 4+ 2Q$ (a) Find the free market equilibrium quantity and price of fish. Excessive fishing depletes the stock of fish in rivers and lakes, imposing an external cost on people who enjoy recreational fishing. This external cost is larger when the quantity of commercial fishing is greater. Assume that: EC = Q (b) Write down the equation for the Social Marginal Cost in this market, as a function of Q. (c) Find the socially optimal quantity of fish that should be produced (QB). (d) What size of a unit tax on (commercially-harvested) fish would make QB the equilibrium quantity?
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