How much should it charge per month for lobster-boat permit

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Reference no: EM13146282

Hampstead, Massachusetts lies on a picturesque bay where fishermen catch lobsters. It costs $2,000 per month to operate a lobster boat. If x boats are operating in Hampstead Bay, the total revenue from the lobster catch will be TRP(x) = $1000(10-x)x . The town council of Hampstead issues permits for boats to go out on the bay to trap lobsters, and it’s trying to determine how many permits to issue. a) Draw a graph indicating the average revenue product, ARP(x) = TR(x)/x. Knowing that the ARP(x) is a straight line, find the expression for and plot the marginal revenue product MRP(x). In the same graph, plot a line indicating the cost of operating a boat. b) If permits are free of charge, how many boats will go out on the bay to trap lobsters? c) What number of boats maximizes profits? d) If the town council wants to restrict the number of boats to the number that maximizes total profits, how much should it charge per month for a lobster-boat permit? (Hint: when the fee is F dollars per month, the marginal cost of operating a boat is (2000+F) dollars per month.

Reference no: EM13146282

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