Consider once more the situation in Problem 3. Explain two policies that do not involve a fee that could result in the optimal level of effort. What complications might arise in the administration of these policies?

Problem 3

Wild morel mushrooms are a delicacy in soups and salads. The following table shows the number of mushrooms that can be harvested per picker per hour in a fictional forest, depending on the number of pickers.

a) Assuming that each mushroom sells for $1, graph the average and marginal revenue for society at each level of effort (number of pickers).

b) Given that the opportunity cost of each picker's time is $10 per hour, label the socially optimal number of pickers and the number of pickers that will enter if the forest is an open-access resource. Explain why the pickers will dissipate the economic rent.

Transcribed Image Text:

Pickers 1 2 3 4 Mushrooms per Pickers Picker] Hour 70 60 50 40