Question
The following table describes the supply of mushrooms in a local market where from 1-8 mushroom hunters find mushrooms on public land and sell them
The following table describes the supply of mushrooms in a local market where from 1-8 mushroom hunters find mushrooms on public land and sell them at $20/kg. The opportunity cost of the mushroom hunters is valued at $15/hour
** There is now a negative externality: a social cost where each mushroom hunter creates $20 of environmental damage.(i.e. 5 hunters = $100 in damage)
** Given the negative externality, if the mushroom hunters were each self-employed and acting in their individual best interest, how many would go out hunting given that new mushroom hunters cannot be excluded from the market if it benefits them to collect mushrooms??
#mushroom hunters | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
#mushrooms collected (kg) | 10 | 18 | 25 | 30 | 34 | 37 | 39 | 40 |
Total revenue @$20/kg | 200 | 360 | 500 | 600 | 680 | 740 | 780 | 800 |
Total wages@$15/hour | 120 | 240 | 360 | 480 | 600 | 720 | 840 | 960 |
Total revenue -total wages | 80 | 120 | 140 | 120 | 80 | 20 | -60 | -160 |
(Total revenue -total wages)/person | 80 | 60 | 46.67 | 30 | 16 | 3.333 | -8.571 | -20 |
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