Marginal Cost of
Catch (per 1000 lbs)
1000 Pounds
of Fish
1
2
3
4
5
6
25
55
95
145
205
275
10
30
50
90
140
200
a) Suppose NOAA determines that the Maximum Sustainable Yield for this fishery
is 6000 lbs of fish per year, if each boat is allowed to catch only 3000 lbs of fish,
what is the total cost to society of catching this quota?
b) Suppose that NOAA wanted to catch these 6000 lbs of fish with “least total cost to
society”, how would they then allocate the catch between the 2 boats?
c)
Suppose each boat is initially allocated 3 Individually Transferrable Quota permits. Each
permit can be used by the boat’s captain to catch 1000 lbs of fish or can be sold to another
boat for whatever the other boat’s captain is willing to pay. If the market price of fish is
$94 per 1000 lbs, would either of the captain’s be willing to sell any permits? How
many? How would the permits be allocated between the two boats after trades/sales are
allowed?