Consider a fishing village where villagers fish in a common lake. The villagers can buy a fishing boat for $300. The price of fish is $1 per pound. The amount of fish caught depends on the number of boats. If there are B boats in the lake, then the average catch (total pounds of fish / number of boats) will be F(B) = 500 - B.a. a. What is the number of boats in equilibrium? b. What is the number of boats in the efficient outcome? c. What should be the tax imposed on the fishermen so that the equilibrium outcome would be efficient?
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In other words, we need to find the value of B where F(B) = 300. Show more…
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