Asked by Jasneet Kaur Singh on Jun 29, 2024
Verified
Suppose that in Horsehead, Massachusetts, the cost of operating a lobster boat is $4,000 per month.Suppose that if x lobster boats operate in the bay, the total monthly revenue from lobster boats in the bay is $1,000(12x x2) .If there are no restrictions on entry and new boats come into the bay until there is no profit to be made by a new entrant, then the number of boats who enter will be X1.If the number of boats that operate in the bay is regulated to maximize total profits, the number of boats in the bay will be X2.
A) X1 8 and X2 8.
B) X1 4 and X2 2.
C) X1 8 and X2 4.
D) X1 12 and X2 8.
E) None of the above.
Lobster Boats
Watercraft specifically designed and used for the catching of lobsters as part of commercial or recreational lobster fishing.
Monthly Revenue
The total income generated by a business or individual from sales or services provided within a month.
- Identify the contribution of authorities and regulatory organizations in lessening harmful external effects for the betterment of welfare.
- Understand the adverse effect of the commons tragedy and the exploitation of communal resources.
Verified Answer
KM
Krystal MartinezJul 05, 2024
Final Answer :
C
Explanation :
To maximize profit, we need to find the point where marginal revenue equals marginal cost. In this case, the marginal revenue for each additional boat is $12,000 and the marginal cost is constant at $4,000. Therefore, we need to find the number of boats that maximizes $12,000x - $4,000x = $8,000x.
Solving for x, we get:
d/dx ($8,000x) = $8,000 = 0
x = 8
So, the number of boats that enter the bay to maximize profits is 8, which is option C for both X1 and X2.
Solving for x, we get:
d/dx ($8,000x) = $8,000 = 0
x = 8
So, the number of boats that enter the bay to maximize profits is 8, which is option C for both X1 and X2.
Learning Objectives
- Identify the contribution of authorities and regulatory organizations in lessening harmful external effects for the betterment of welfare.
- Understand the adverse effect of the commons tragedy and the exploitation of communal resources.