Qu. 10* Currently, 25 fishers send one boat each week, to fish a stock of Southern Calamari in Tasmania's state waters. Each boat returns with a catch worth $1100. It costs $1000 per boat per week to send it out fishing for Southern Calamari. Every additional boat beyond 25, that is sent to fish Southern Calamari results in the catch falling by $20 for every boat out fishing Southern Calamari in Tasmania's state waters.

a. Joan is one of the 25 fishers and is considering sending out additional boats each week. Joan assumes that all other fishers will continue to send one boat out each. Complete the following table:

Number of Boats - Quantity (Q)

$ of Fish

Caught / Boat - Price (P)

Total Boat Revenue $/week (TR)

Total Boat Cost $/week (TC)

Marginal

Revenue $/boat/week (MR)

Marginal Cost $/boat/week (MC)

0

$0

$0

$0

$0

$0

1

$1,100

$1,100

$1,000

$1,100

$1,000

2

$1,080

$2,160

$2,000

$1,060

$1,000

3

4

5

1. How many boats should Joan send out to maximise her profit (assuming all other fishers will continue to send one boat each)? Explain why.
2. If all other fishers of Southern Calamari think the same as Joan, how many boats will fish for Southern Calamari in Tasmania's state waters each week? How many $ of fish will be caught per boat?

Suppose that before Joan and all the other fishers increase the number of boats they send out per week, the government intervenes.

d. Complete the table below.

Number of Boats - Quantity (Q)

$ of Fish

Caught / Boat - Price (P)

Total Boat Revenue $/week (TR)

Total Boat Cost $/week (TC)

Social Marginal Revenue $/boat/week (MR)

Social Marginal Cost $/boat/week (MC)

12

$1,360

$16,320

$12,000

13

$1,340

$17,420

$13,000

$1,100

$1,000

14

15

16

$1,280

$980

1. Explain what the socially efficient number of boats is. If the 16thboat brings in an additional $1280, why is the marginal revenue only $980?
2. Suggest a way that the government could achieve a social optimum.