2. The five residents of a tiny Mediterranean island called Castellorizzo can engage in one of...
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2. The five residents of a tiny Mediterranean island called Castellorizzo can engage in one of two business activities. Note that each resident has an investment income of $100. Under the first activity, each resident on the island can make jewelry using sea glass and beach stones, and sell them to tourists. The jewelry business requires a license, which costs $100 per license. If the residents choose the jewelry business, each makes a profit of $25 (i.e., they recover their license fee of $100 and then earn another $25). Alternatively, each resident can spend his/her $100 to buy a small fishing boat and fish Bluefin Tuna in the waters around the island, and then sell the Tuna for a price of $1 per Tuna in the island's fish market. The relationship between the number of fishing boats and Tuna caught are presented in the Table below: Number of fishing boats Number of Tuna caught 1 2345 200 170 140 110 90 a. If the island residents make their decisions independently from each other, how many fishing boats would go out to the sea? What would be the total income of the residents of the island in this case? b. If the island residents make their business decisions collectively in an effort to maximize their total income, how many fishing boats would go out to the sea? What would be the total income of the residents of the island in this case? 2. The five residents of a tiny Mediterranean island called Castellorizzo can engage in one of two business activities. Note that each resident has an investment income of $100. Under the first activity, each resident on the island can make jewelry using sea glass and beach stones, and sell them to tourists. The jewelry business requires a license, which costs $100 per license. If the residents choose the jewelry business, each makes a profit of $25 (i.e., they recover their license fee of $100 and then earn another $25). Alternatively, each resident can spend his/her $100 to buy a small fishing boat and fish Bluefin Tuna in the waters around the island, and then sell the Tuna for a price of $1 per Tuna in the island's fish market. The relationship between the number of fishing boats and Tuna caught are presented in the Table below: Number of fishing boats Number of Tuna caught 1 2345 200 170 140 110 90 a. If the island residents make their decisions independently from each other, how many fishing boats would go out to the sea? What would be the total income of the residents of the island in this case? b. If the island residents make their business decisions collectively in an effort to maximize their total income, how many fishing boats would go out to the sea? What would be the total income of the residents of the island in this case?
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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