Map Sapling Learning Bluefin tuna is a fish that is in high demand from consumer
ID: 1228159 • Letter: M
Question
Map Sapling Learning Bluefin tuna is a fish that is in high demand from consumers. Overfishing of this species, particularly in the Mediterranean Sea has led to the strong possibility of extinction. The graph below is a hypothetical representation of the Bluefin tuna market. Use the graph to answer the questions MSC Marginal Social Cost, MPC Marginal Private Cost MSB Marginal Social Benefit 100 If this market is unregulated what will be the equilibrium MSC price and quantity? 90 Price Quantity 80 Number Supply MPC 70 pounds S 60 Why is the market equilibrium not socially optimal? 50 O MSB is greater than MSC at the market equilibrium 40 O MSC is greater than MSB at the market equilibrium. 30 Because there is still more Bluefin tuna available to catch 20 O MSC is equal to MSB at the market equilibrium. 10 Demand MSB 0 3 4 5 6 7 8 9 10 Number of pounds (in thousands)Explanation / Answer
Equilibrium under unregulated market occurs at MSB = MPC.
So, the equilibrium price = $40
Equilibrium output is 5 ponds.
As we know socially optimal market equilibrium occurs at MSC = MSB. But in this case MSC is greater than MSB i.e., benefit is less than cost. So, it is not socially optimal equilibrium.
The answer is, MSC is greater than MSB at the market equilibrium.