Considering the data provided in Problem 3, what is the economic rent with the socially optimal number of pickers? What economic rent results from entry based on private incentives? What entry fee would result in the socially optimal number of pickers?

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.

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