Upcoming in Class Homework #8 due today Homework #9 due next Wednesday Quiz #4 Wednesday Nov. 13th Group Outline due Wed. Nov. 13th Exam #4 Wed. Nov 20th Homework #10 Wed. Nov. 20th
Homework #8 • What is the difference between a stable and an unstable equilibrium in the population of a fishery? Use a graph to support your answer. Where does the maximum sustained yield occur in your graph?
Homework #8 • Use a graph with a total cost curve and a total revenue curve for a fishery to show the difference between the economically optimal harvest, the maximum sustained yield, and the open-access equilibrium.
Homework #8 • What is the typical relationship between the economic optimum (EE), maximum sustained yield (EM), and the open-access equilibrium (EO)?
Public Policies • Private Ownership • Raise the Real Cost of Fishing • Limiting the length of the season • Restricting the types of nets • NB =0 • Licenses • Welfare transfer to government • ITQs (Individual Transferable Quotas ) • Welfare depends on initial winners and losers
ITQ Markets • Efficient ITQ Market • Quota entitles holder to catch a specified amount of the total authorized catch • Catch authorized is equal to the efficient catch for the fishery • Quotas should be freely transferable among fishermen • ITQs Allocation – Politically Messy • Auction • Grandfathering • Lottery • ITQ Work! • http://www.economist.com/node/12253181
Fisheries Problem Price = $10/ton Cost per Boat is $40
Problem Construct a graph showing the relationship between stock and growth Find the stock level corresponds to the following: Maximum Sustainable Yield(MSY), natural equilibriums, and the stable and unstable equilibriums
Problem 2 Now assume that we can translate this population/yield relationship into an economic relationship between fishing boats and total product.
Identify the following A natural state with no fishing industry A fishing industry obtaining the MSY from the fishery A fishing industry operating under an efficient management plan, with economically optimal returns A fishing industry characterized by open access.
A Problem with Fishing Boats Fish prices average $10 per fish and the cost to operate a fishing boat for a year is $40. Construct a graph showing total revenue and total costs in the fishery. TR = P*Q TC= AC of Boat * Number of Boats
A Problem with Fishing Boats Derive graphs showing marginal and average revenue and marginal cost. AR = TR/Q MR = ∆TR/∆Q MC = ∆TC/ ∆Q