Question 3 ( 10 marks)

The X nation has 5 million residents, whose only activity is producing and consuming fish. They produce fish in two ways. Each person who works on a fish farm raises 2 fish per day. Each person who goes fishing in one of the nation's many lakes catches X fish per day. X depends on N, the number of residents (in millions) fishing in the lakes. In particular, if N million people fish in the lakes, each catches X = 6 - N fish. Each resident is attracted to the job that pays more fish, so in equilibrium the two jobs must offer equal pay.

A. Why do you suppose that X, the productivity of each fisherman, falls as N, the number of fishermen, rises? What economic term would you use to describe the fish in the country's lakes? Would the same description apply to the fish from the farms? Explain. (2 marks)

B. The country's Freedom Party thinks every individual should have the right to choose between fishing in the lakes and farming without government interference. Under its policy, how many of the residents would fish in the lakes and how many would work on fish farms? How many fish are produced? (2 marks)

C. The country's Efficiency Party thinks X should produce as many fish as it can. To achieve this goal, how many of the residents should fish in the lakes and how many should work on the farms? (Hint: Create a table that shows the number of fish producedon farms, from the lakes, and in totalfor each N from 0 to 5.) (6 marks)

Question number 4 is on the screenshot.

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