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The village of Pescatore is situated next to a medium sized lake in which citizens can fish from privately owned boats. The cost to a boat owner of owning and caring for a boat is 4 groschens. The lake gets over-fished if too many boats share the lake. The total revenue from all boats in the lake is TR=48B-2Jil, where B is the number of boats in the lake. The village council notices that total profit from fishing is not maximized if citizens are allowed free access to the lake. The council decides to allow a boat to fish in the lake only if its owner buys a fishing licence. To maximize total profit (of citizens and council), how many groschens should the council charge for a licence licence?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9742991

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