Upcoming in Class Homework #8 Due Thursday

Quiz #4 Thursday Nov. 17th

Homework #9 Thursday Nov. 17th

Group Outline due Thursday Nov. 17th

Exam #4 Dec. 1st

Homework #8 What is the difference between a

stable and an unstable equilibrium in the population of a fishery? Use a graph to support your answer. Where does the maximum sustained yield occur in your graph?

Homework #8 Use a graph with a total cost curve

and a total revenue curve for a fishery to show the difference between the economically optimal harvest, the maximum sustained yield, and the open-access equilibrium.

Homework #8 What is the typical relationship

between the economic optimum (EE), maximum sustained yield (EM), and the open-access equilibrium (EO)?

Relationship between the Fish Population and Growth

The Gordon-Schaefer Model

Market Allocation

in a Fishery

The Price of Fish If the price of fish increases, total

revenue will increase, shifting the open-access equilibrium higher and the stock of fish lower.

As stocks deplete, we move closer to the minimum viable population.

Lower stocks imply more scarcity and higher prices.

Public Policies Private Ownership

Raise the Real Cost of Fishing• NB =0

Permits or Taxes• Welfare transfer to government

ITQs (Individual Transferable Quotas )• Welfare depends on initial winners and losers

CANADA'S PACIFIC COAST GEODUCK CLAM FISHERY

ITQ Markets ITQs Allocation

• Auction• Grandfathering• Lottery

Efficient ITQ Market• Quota entitles holder to catch a specified

amount of the total authorized catch• Catch authorized is equal to the efficient catch

for the fishery• Quotas should be freely transferable among

fishermen

Fisheries ProblemStock

10 20 30 40 50 60 70 80 90 100

Growth

0 800 1600

2400

2800

3000

2800

2200

1200

0

Find the MSY, natural equilibriums, and identify the stable and unstable equilibriums

Price = $1,000/ton Cost per Boat is $4,000

Problem Construct a graph showing the

relationship between stock and growth

Construct a graph showing the relationship between stock and the growth rate

What stock level corresponds to the maximum growth rate?

What stock level corresponds to the MSY?

Growth Rate

Se-ries1

-2

-1

0

1

2

3

4

5

6

7

4

5.36

5.65

4

2.75

1.330.75

0

-1

Growth Rate

Growth Rate

Growth

10 20 30 40 50 60 70 80 901000

500100015002000250030003500

Growth

Growth

A Problem with Fish Identify the stable and unstable

equilibriums in a natural state.

Problem 2 Now assume that we can translate

this population/yield relationship into an economic relationship between fishing boats and total product.

Boats 100 200 300 400 500 600 700 800 900

Total Product

1200

2200

2800 3000 2800 2400 1600 800 0

A Problem with Fishing Boats

Fish prices average $1,000 tons and the cost to operate a fishing boat for a year is $4,000.

Construct a graph showing total revenue and total costs in the fishery.

Derive graphs showing marginal and average revenue and marginal cost.

Problem

100

200

300

400

500

600

700

800

900

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Total RevenueTotal Cost

Identify the following A natural state with no fishing industry

A fishing industry obtaining the MSY from the fishery

A fishing industry operating under an efficient management plan, with economically optimal returns

A fishing industry characterized by open access.