Question 3 - Subsidies (25 points)

Certain types of fishing subsidies have the potential to impact the total cost curve (TC) represented in the basic Bioeconomic Model. Depending on the nature of the subsidy, the total cost curve can rotate or shift? A fuel subsidy is an example of such a subsidy.

The diagram below depicts an open access sustainable harvest level with a fuel subsidy in place.

1. Explain the theoretical impact on the total cost curve (shift or rotate) if the subsidy was eliminated?
2. Explain the eventual impact (assuming a transition period) of the elimination of the subsidy on;
3. The level of fishing effort?
4. The amount of sustainable catch?
5. Biomass?
6. Profit?

Total Revenue & Total Cost TC subsidy TR EOA Effort