Question

pr duoesa daly income of S 15, which might be wo th $60、C00 (dependngon te oppotr tycost of capital, he growt rat of the daly income, and he lfetme of the daily income Microeconomics, Module 19, Common Proparty and Publc Goods Chapter 14) tf tere wam oriy two tsherman.they would pay $36-2 κ S6 S24 to use tei ko. The lake produces a dalyincome of $24, which might be worth $80,000, dapending on he opportunity cost of captal the growth rate of the daly income, and tho lifetme of the daly income. Thesa vatablas doponds on the daly dapletion offsh fom ho ako The atached PDFflo has bottor formating-) Suppose many poople want to catch ish in a wal-stocked lake. ● A te rumberoffshermenincreases, te oostofhrngboats and oquipment nses;that i, te magna Our concern is not the valuo ofishing as an ocaupation. If fishing is compottve, isharmen earn a normal wago for thoir eforts. Ourconcarnis the value of the lake tsof Athough tho bkeisclearly avaluable assat al its vaue &disspatod by ovrusa. oost of fishing riaswth the numbor of fisharman Ast e rumb r of tshermen raraases,thenumberof tt caght by aach po son decreases;thema gnal valus of fishing docaos with the number of sharmon. ● The table bolow shows the marginal c oost and value of ishing: Fisham MaghalCost af Total Valu Value par Margina Rishing (Por Banoft A. Complete the last two columns of this tabla. The valuo par isharman the averago value por fishamman, assuming all sharmen have oqual ablity tocath fish. Forexampie, the valuoperfshornan for two tshamen is $36 /2-$18. bonet of the soond fsherman the additional social vo of hefishomman. Forexample, the soca $36 .. $20-$16. C. th lke is conmon popety how many shamon wiluse ? (Choosetherow whore the marginal cost to the fisherman in the secand column equa's the avarngo value of ishing to he fsharman in the fourth D. How much social gain is created bytishingin the lake? For the row datormined above, use the value o tho ish caughtminus the product of the number of ishermen and the magnal cost of aach Esharman.) You shoud gat an answar of $0, since allgansfiom common propaty are disspated. Queston: The maginal cost includos the valuo of tho sharman's tm. This examplo says thatthe not presant value of fishing zao. Thatis ue forall wor; if we includethe value ofone'stime,the nat presant value of any occupaton should be zero (in a competve labor marko What is diffarant about common Answer: The costincludesta value of te fsherman's tra but not te opportnty of te lake. The lake isa valuable assot. if tere were olyanofsherman,ho would payS20-$5 : $1 5 to use te ๒ke. The lake

Answer 1

Value per fisherman is given by total value divided by the number of fishermen.

It is obtained by dividing the quantity in column 3 by that in column 1. This can be used to fill column 4.

Also social marginal benefit is given by subtracting entry in column 3 from the previous entry i.e. additional social value to the last fisherman .

Using this to fill the table, we get:

No. of fishermen	Marginal cost	Total value	Value per fishermen	Social marginal benefit
0	-	0	-	-
1	5	20	20	0
2	6	36	18	16
3	7	48	16	12
4	8	56	14	8
5	9	60	12	4
6	10	60	10	0
7	11	56	8	-4
8	12	48	6	-8

C.

Assuming that the lake is common property, optimal number of fishermen is such that

Marginal cost = Average value of fishing

We can see from the table that for n = 6, this holds true.

D.

Social gain = Total value - No. of fishermen*marginal cost

= 60 - 6*10 = 0

This is so since all the gains from the common property are exhausted at the optimal value of fishing.