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AEDE 4003
Quiz 6
Name: ___________________________________________
Circle the correct answer:
1. The “tragedy of the commons” is:
a. Lack of meals in a university’s halls of residence
b. Ill-defined property rights over a common-property resource
c. A play by William Shakespeare
d. Prime Minister’s Question Time in the British Parliament
2. Examples of ambiguous or non-existent property rights are:
a. Excessive fishing in international waters
b. Extinction of a species such as the spotted owl due to excessive logging
c. Over-grazing of common land
d. All of the above
3. Typically in international waters, fishing vessels do not have open access:
a. True
b. False
4. The chances of a fish species surviving are greater if:
a. The population gets below a certain threshold level
b. They do not migrate
c. The population stays at or above a certain threshold level
d. They migrate and then return to the fishing ground
5. To analyze the tragedy of the commons, we assume a production model where:
a. The number of fishing vessels is fixed and the area of water is variable
b. The number of fishing vessels is fixed and the area of water is fixed
c. The number of fishing vessels is variable and the area of water is variable
d. The number of fishing vessels is variable and the area of water is fixed
6. If we assume the production function exhibits diminishing marginal returns:
a. The total number of fish caught increases at an increasing rate as the number of
fishing vessels increases
b. The total number of fish caught increases if the number of fishing vessels remains
constant
c. The total number of fish caught increases at a decreasing rate as the number
of fishing vessels increases
d. The total number of fish caught decreases at an increasing rate as the number of
fishing vessels increases
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7. Average product is defined as:
(a) The number of fish caught per vessel
(b) The number of fish caught by the first vessel
(c) The number of fish caught by the last vessel
(d) The number of fish caught by the median vessel
8. Marginal product is the extra fish caught from adding one more fishing vessel:
(a) True
(b) False
9. Under private ownership, profits are maximized where:
(a) Average revenue of a fishing vessel equals the rental cost of the vessel
(b) Marginal revenue of a fishing vessel equals the rental cost of the vessel
(c) Average revenue of a fishing vessel is just above the rental cost of the vessel
(d) Marginal revenue of a fishing vessel is just above the rental cost of the vessel
10. Under open access, vessels enter up to the point where average revenue of a vessel is
equal to the rental cost of a vessel:
(a) True
(b) False
11. If fishing vessels are free to rent:
(a) Over-fishing is more likely with open access
(b) Over-fishing is more likely with private ownership
(c) Over-fishing is equally likely with open access or private ownership
(d) Over-fishing is less likely with open access
12. Setting catch limits on fishing vessels is:
(a) Very likely to prevent over-fishing
(b) Somewhat likely to prevent over-fishing
(c) Very unlikely to prevent over-fishing
(d) Somewhat unlikely to prevent over-fishing
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For an extra 2 points: Available data show that availability of bottom-living fish for the
British fishing fleet fell by 94% between 1889 and 2007. Apart from open access fishing,
what do you think was a major factor driving this “tragedy of the commons”?
The industrialization of the fishing sector as a result of, the switch from a sail-powered to
a mechanically-powered fishing fleet.
For an additional 2 points: Assuming diminishing marginal returns, and a constant
price for renting a fishing vessel, use the appropriate diagram to show how a tax on
fishing vessel rental could reduce the risk of over-fishing in an open access fishing
ground:
The diagram below is what is needed here, with average and marginal revenue (AR,
MR), as well as marginal cost (MC), on the vertical axis, and the number of vessels (X)
on the horizontal axis. Show that open access will result in X2, and that it can be reduced
to say X1 if a tax is added to the rental cost of vessels. Remember you get AR and MR
by multiplying average product (AP) and marginal product (MP) by the price of fish.
AR/MR
MC
MC + tax
MC=rental cost
AR
MR
X1
X2
X= Vessels
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