The State Gaming commission rejects the licensing requirement. Instead, by virtue of a court proceeding, a...

Transcribed Image Text:

The State Gaming commission rejects the licensing requirement. Instead, by virtue of a court proceeding, a group of representing property owners and communities surrounding of the area around Chesapeake Bay wins the rights to all of the harvest of the fish in the Bay. The problem is that only one person in the surrounding communities likes to fish. The group considers leasing its right to a sport fishing tour operator. The cost to the tour operator of leading a weekend fishing excursion in the Bay is $10/trip. The boat accommodates 5 sport-fishermen. E. [6 points] What is the maximum that the tour operator will be willing to pay to lease the citizen's group's fishing right for a weekend? What other option does the group have? If the considerations specified are the only ones that matter to the citizen's group, what will it do? Washington-area residents who like to fish have two options: they can fish either in the Atlantic Ocean or in the Chesapeake Bay. The ocean is very large and sparsely populated with fish. The Bay is smaller, with many fish, but is ecologically very fragile. As more people fish in the Bay, the water becomes polluted and kills some of the fish before they can be caught. On any given weekend (the only time sport fishing occurs), if x people fish in the Atlantic Ocean, each one catches 10 fish (regardless of the value of x), while if y people fish in the Bay, each catches 20 - 2y. Each fish caught yields $1 of "benefit" to the sport-fisherman/woman. There are exactly 10 such sport fishermen in the region. A. [6 points] Suppose that individuals are allowed to fish without having licenses and can choose where to fish without any regulation. How many would choose to fish in the Atlantic Ocean and how many would choose to fish in the Chesapeake Bay? In what sense is the predicted outcome an economic equilibrium? B. [6 points] Individuals are not required to have fishing licenses in order to fish, but such a requirement could be imposed. If it were imposed, then what is the maximum amount that an individual would be willing to pay for a fishing license when all ten residents are fishing? C. [6 points] Six of the town's residents who like to fish move to Alaska. With only four fisher people left in town, how many will fish in the Atlantic Ocean and how many will fish in the Chesapeake Bay? What is the maximum amount that an individual would be willing to pay for a fishing license when all four residents are fishing? An economic expansion draws people to the region and restores the region's fishing population to 10 people. A proposal before the Maryland State gaming commission would require individuals to purchase weekend fishing licenses in order to fish. A consulting firm explains that the State would have to spend $10 to issue, record, and administer each fishing license, so the proposal sets the price of a license at $10. D. [6 points] If passed, what effect would the proposal have on the number of people who fish, and their allocation between the Atlantic Ocean and the Chesapeake Bay? What would be the total surplus generated in the fishing market after enactment of the proposal? (Note: Total surplus equals fish catcher's surplus plus government surplus, in which government surplus equals the difference between license revenue and the cost of government operations.) The State Gaming commission rejects the licensing requirement. Instead, by virtue of a court proceeding, a group of representing property owners and communities surrounding of the area around Chesapeake Bay wins the rights to all of the harvest of the fish in the Bay. The problem is that only one person in the surrounding communities likes to fish. The group considers leasing its right to a sport fishing tour operator. The cost to the tour operator of leading a weekend fishing excursion in the Bay is $10/trip. The boat accommodates 5 sport-fishermen. E. [6 points] What is the maximum that the tour operator will be willing to pay to lease the citizen's group's fishing right for a weekend? What other option does the group have? If the considerations specified are the only ones that matter to the citizen's group, what will it do? Washington-area residents who like to fish have two options: they can fish either in the Atlantic Ocean or in the Chesapeake Bay. The ocean is very large and sparsely populated with fish. The Bay is smaller, with many fish, but is ecologically very fragile. As more people fish in the Bay, the water becomes polluted and kills some of the fish before they can be caught. On any given weekend (the only time sport fishing occurs), if x people fish in the Atlantic Ocean, each one catches 10 fish (regardless of the value of x), while if y people fish in the Bay, each catches 20 - 2y. Each fish caught yields $1 of "benefit" to the sport-fisherman/woman. There are exactly 10 such sport fishermen in the region. A. [6 points] Suppose that individuals are allowed to fish without having licenses and can choose where to fish without any regulation. How many would choose to fish in the Atlantic Ocean and how many would choose to fish in the Chesapeake Bay? In what sense is the predicted outcome an economic equilibrium? B. [6 points] Individuals are not required to have fishing licenses in order to fish, but such a requirement could be imposed. If it were imposed, then what is the maximum amount that an individual would be willing to pay for a fishing license when all ten residents are fishing? C. [6 points] Six of the town's residents who like to fish move to Alaska. With only four fisher people left in town, how many will fish in the Atlantic Ocean and how many will fish in the Chesapeake Bay? What is the maximum amount that an individual would be willing to pay for a fishing license when all four residents are fishing? An economic expansion draws people to the region and restores the region's fishing population to 10 people. A proposal before the Maryland State gaming commission would require individuals to purchase weekend fishing licenses in order to fish. A consulting firm explains that the State would have to spend $10 to issue, record, and administer each fishing license, so the proposal sets the price of a license at $10. D. [6 points] If passed, what effect would the proposal have on the number of people who fish, and their allocation between the Atlantic Ocean and the Chesapeake Bay? What would be the total surplus generated in the fishing market after enactment of the proposal? (Note: Total surplus equals fish catcher's surplus plus government surplus, in which government surplus equals the difference between license revenue and the cost of government operations.)