5. Optimal consumption of a commons Aa Aa A small village is located near a bay.

Question

5. Optimal consumption of a commons Aa Aa A small village is located near a bay. There are five people in the village, each of whom has accumulated savings of $1,000. Each person can elther buy a fishing boat and sell the lobsters they catch in the bay (assume the boat does not depreciate over time), or buy a T-bill that pays 13% interest. Thus, someone who chooses not to buy a boat will earn $130 of income each year. Lobsters sell for $10 per pound. The more people who choose to fish in the bay, the fewer lobsters each will catch The total number of lobsters caught and the total value of the lobsters caught by each person are shown by the following table: Lobsters Caught (Pounds per year) 18 32 42 Income per Boat (Dollars per year) $180 $160 $140 $120 $100 Number of Boats Suppose that of the five villagers, two (Spencer and Arnold) say they are definitely going to buy boats and fish, and two (Nicole and Steve) say they are definitely going to buy T-bills. The filth, Joann, is undecided than the s130 she could get from investing her If Joann chooses to buy a boat and fish, she will earn money in a T-bill. Suppose two fishing boats (Spencer's and Arnold's) are in the bay, while Nicole and Steve purchase T-bills. Fill in the F8 F10 F11 F12 5 6 7

Explanation / Answer

a) more

b) (i)invest her money- spencer and arnold's total income=$320; Joann's income = $130 ; Total income= $710 (ii) buy a boat and fish - spencer and arnold's total income = $280; Joann's income= $140 ; Total income=$680

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.