BEA111 Introduction to Markets and the Economy - Assignment 1 Microeconomics Question 6-40 marks (2-5 sentences + calculations per section) Currently, 6 fishers send one boat each week, to fish a stock of mackerel (blue mackerel, jack mackerel and red bait) off Tasmania's east coast. Each boat returns with a catch worth $2,700. It costs $2,000 per boat per week to send it out fishing. Every additional boat beyond 6, that is sent to fish Southern Calamari results in the catch falling by $150 for every boat out fishing in Tasmania's state waters. Assume the Tasmanian mackerel fishery is not regulated. a. Bill is one of the 6 fishers and is considering sending out additional boats each week. If all other fishers continue to send one boat only, how many fishing boats should Bill send out to maximise profit? Explain why. [10 marks) b. Explain why Bill has an incentive to send an additional boat to fish for mackerel, but that this is not socially optimal. Is there an externality when Bill sends out an additional boat? [10 marks) C. If all other fishers of mackerel think the same as Bill, how many boats will fish for mackerel off Tasmania's east coast each week? How many $ of fish will be caught per boat? [5 marks) d. Explain why the unregulated Tasmanian mackerel fishery is a common resource and results in a "Tragedy of the Commons". [10 marks) 2. Suggest a policy that the Tasmanian Government could implement to reduce or eliminate the overfishing of mackerel and briefly why it would work. [5 marks)