Eco200: Practice Test 1 Covering Chapters 10 through 15

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$Math 238 - Seattle Central Community College$

4. Excessive fishing occurs because each individual fisherman has little incentive to maintain the speciesfor the following year.a. The fish in the ocean can be considered which type of good, private, public, common resources, ornatural monopoly. When describing which type of good, be sure to specify if fish are rival and/orexcludable.b. Why is there a problem with fish while there is no problem with cows?c. How can governments solve this problem?d. Give some reasons why this solution sometimes fails?Solution: Chapter 11 problem…a. Fish in the ocean are common resources, rival and not excludable. Fish are rival in that every timea fisherman catches one it prevents someone from catching that same fish. Fish are not excludablebecause you cannot prevent people from fishing unless the government takes action, sayrestrictions, corrective taxes, or tradable permits.b. Cows are private property while fish in the ocean are common resources, as long as there are nopermits sold for fish. If the government chooses to sell permits for the fish, then the fish become aprivate good.c. Tradable permits or corrective taxes will help alleviate the problem since the quantity of fishcaught depends on some form of fee through taxation or permits.d. Many countries have access to the ocean. It is difficult to get international cooperation amongcountries that hold different values. The oceans are so vast that enforcing any agreement would bedifficult.
5. Consider the following demand and cost information for a monopoly.Quantity Price TotalCost0 $30 $31 25 72 20 123 15 184 10 25a. What is the marginal revenue for the second unit?b. What is the marginal cost for the fourth unit?c. What is the maximum profit this monopolist can earn?d. What price does the monopolist set?Solution:a. $15b. $7c. $28d. $20Q P TR MR TC MC Profit(TR – TC)0 $30 0 - $3 - -31 25 25 25 7 4 182 20 40 15 12 5 283 15 45 5 18 6 174 10 40 5 25 7 15
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Eco200: Practice Test 1 Covering Chapters 10 through 15

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