1. Consider a fishing community with a large number of individually-operated fishing boats. All of the boats are the same and catch the same type and quality of fish. The boats are simple and are not considered a major cost.

Market demand for the fish is given by P = 200 - Q, where P is the price per kilogram of fish. Assume that the fishing boats have no fixed costs but do have a constant marginal cost of $10.

1. Identify the problem for the firms in this market. What is the appropriate model to evaluate this problem? What evidence supports your choice of model? (See the section on Critical Thinking in your handout to help you describe the relevant evidence.)
2. Use the model to evaluate the outcomes for this market. What are the conclusions of the model, i.e. what will be the equilibrium market quantity and price? (See the section on Critical Thinking in your handout to help you identify the conclusion of the model.)
3. Calculate the profit and consumer surplus in this market. Communicate (explain) what this means for firms and consumers in the market.

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1 Identifying the Problem and Appropriate Model Problem The fishing community consists of a large number of individuallyoperated fishing boats that ar... View the full answer