Upcoming in Class Homework #8 Due Thursday Quiz #4 Thursday Nov. 17th Homework #9 Thursday Nov. 17th Group Outline due Thursday Nov. 17th Exam #4 Dec. 1st

Homework #8 What is the difference between a stable and an unstable equilibrium in the population of a fishery? Use a graph to support your answer. Where does the maximum sustained yield occur in your graph?

Homework #8 Use a graph with a total cost curve and a total revenue curve for a fishery to show the difference between the economically optimal harvest, the maximum sustained yield, and the open-access equilibrium.

Homework #8 What is the typical relationship between the economic optimum (EE), maximum sustained yield (EM), and the open-access equilibrium (EO)?

Relationship between the Fish Population and Growth Growth rate = births – deaths-catch/pop *100. Fish Stock is just the number of fish. Where the line crosses the x-axis. The growth rate =0. So births=deaths. The population over time is the same. Above x-axis. Births> deaths. So to be at point S1 the births outweigh deaths the population get larger, and grow. The number of fish grow. Say to s2 again, positive growth rate. To s3 positive growth rate…. So what you see is that any population greater than Slower bar will drive the population toward S upper bar. Supperbar is what we call a stable equilibrium…

The Gordon-Schaefer Model Total Benefits is derived from the growth curve. This is because price is constant. Note that more effort is associated with smaller populations. So the curve is the reverse of the Schaefer Curve. Em is the point where benefit is maximized. This is the level of effort that will bring the most sustained yield and therefore the most benefit. But we need to account for costs. Total costs are increasing because MC are constant. MC and MB are the slope. So where the slopes of the two lines are equal is where the net benefits are maximized. In this graph, Net Benefits is the difference between the Total Benefits and the Total Costs. Rather than the area under the curve. This is because we are looking at totals rather than are margins. (Ee) Note that the maximum sustainable yield is not the efficient level to harvest. This is due to the total cost of harvesting. Em is efficient only if MC=0 If MC>0, then the efficient level of effort > maximum sustainable effort. This means the static efficient level of effort leads to larger populations. Because this graph is the reverse of the Schaefer curve graph.

Market Allocation in a Fishery Sole owner fishes at effort level Ee because he captures all the profit. Now, in the open-access model. If fishermen’s effort totaled Ee there would be profit for all of the fisherman. Because there is profit being made, more fisherman are going to enter and increase the effort level, and decreasing profit. They will continue to enter until profit is zero. Thus, the contemperanous cost is such that the fisherman spend so much effort to catch too few fish.

The Price of Fish If the price of fish increases, total revenue will increase, shifting the open-access equilibrium higher and the stock of fish lower. As stocks deplete, we move closer to the minimum viable population. Lower stocks imply more scarcity and higher prices.

Public Policies Private Ownership Raise the Real Cost of Fishing NB =0 Permits or Taxes Welfare transfer to government ITQs (Individual Transferable Quotas ) Welfare depends on initial winners and losers

CANADA'S PACIFIC COAST GEODUCK CLAM FISHERY

ITQ Markets ITQs Allocation Efficient ITQ Market Auction Grandfathering Lottery Efficient ITQ Market Quota entitles holder to catch a specified amount of the total authorized catch Catch authorized is equal to the efficient catch for the fishery Quotas should be freely transferable among fishermen

Fisheries Problem Stock 10 20 30 40 50 60 70 80 90 100 Growth 800 1600 800 1600 2400 2800 3000 2200 1200 Total Revenue 1200000 2200000 2800000 3000000 28000000 2400000 1600000 800000 0 Total Cost 400000 800000 1200000 1600000 2000000 2400000 2800000 3200000 3600000 NB 800000 1400000 1600000 1400000 26000000 0 -1200000 -2400000 -3600000 Economic Optimum = 300 boats, 2800 fish MSY = 400 boats, 3000 fish Open-Access = 600 boats, 2400 fish Find the MSY, natural equilibriums, and identify the stable and unstable equilibriums Price = $1,000/ton Cost per Boat is $4,000

Problem Construct a graph showing the relationship between stock and growth Construct a graph showing the relationship between stock and the growth rate What stock level corresponds to the maximum growth rate? What stock level corresponds to the MSY?

Growth Rate

Growth

A Problem with Fish Identify the stable and unstable equilibriums in a natural state.

Problem 2 Now assume that we can translate this population/yield relationship into an economic relationship between fishing boats and total product. Boats 100 200 300 400 500 600 700 800 900 Total Product 1200 2200 2800 3000 2400 1600

A Problem with Fishing Boats Fish prices average $1,000 tons and the cost to operate a fishing boat for a year is $4,000. Construct a graph showing total revenue and total costs in the fishery. Derive graphs showing marginal and average revenue and marginal cost.

Problem

Identify the following A natural state with no fishing industry A fishing industry obtaining the MSY from the fishery A fishing industry operating under an efficient management plan, with economically optimal returns A fishing industry characterized by open access.