What is the efficient number of crabbers

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Reference no: EM13734372

Anyone who has ever eaten crabs from the Chesapeake Bay knows that the quality of crab cakes declines with the square of the distance from the Bay. Thus, one should never order crab cakes at Red Lobster, for example. Unfortunately, crabs have been over-harvested. Some data relating the daily crab catch to number of crabbers is given below.

Number of crabbers Total crab catch Average crab catch Marginal catch

(bushels)

1 50

2 100

3 150

4 200

5 240

6 270

7 290

8 300

9 300

10 300

Complete the table above with the average and marginal catch.

Assume that the price of a bushel is $1 and the opportunity cost of crabbing is $30. How many crabbers will harvest crabs on a given day?

What is the efficient number of crabbers?

Suppose the government wished to promote efficiency in crabbing by requiring crabbers to purchase licenses. How much should they charge (per day) for a license?

Reference no: EM13734372

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