Consider a fishery characterized by the following total cost (TC) and total revenue (TR) curves as...

Consider a fishery characterized by the following total cost (TC) and total revenue (TR) curves as a function of total effort (E): TC = 12E and TR = 32E – E 2 , Differentiating these functions yields the marginal cost (MC) and marginal revenue (MR) curves: MC = 12 and MR = 32 – 2E.

a. Draw a graph depicting total costs and total revenues as a function of effort in the fishery. At what effort level are total revenues maximized? (5 points)

b. With open access to the fishery, what are the equilibrium levels of effort and total profit? (5 points)

c. What level of effort maximizes total profits in the fishery? What are total profits at this level of effort? (5 points)

Expert Solution

Rahul Sunny answered 2 years ago

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