The Ocean Pacific fleet has just decided to use a pole-and-line method of fishin
ID: 1108948 • Letter: T
Question
The Ocean Pacific fleet has just decided to use a pole-and-line method of fishing instead of gill netting to catch tuna due to a concern for endangered species that can become caught in fishing nets.
Ocean Pacific is limited in the short run to the current fleet of boats, and has decided to conduct a series of experiments to determine the impact of changing the crew size. The results of these experiments follow.
a) At what point (what number of fishermen) does diminishing returns occur?
b) Suppose the market price of tuna is $3.50/pound. How many fishermen should the company use if the daily wage rate is $100?
c) Suppose a glut in the market for tuna causes the price to fall to $2.75/pound. At this new price, how many fishermen should the company now use if the daily wage rate remains at $100?
d) Suppose the price of tuna rises to $5.00/pound. At this new price, how many fishermen should the company now use if the daily wage rate remains at $100?
e) In the long run, Ocean Pacific could acquire more boats or sell some of their existing boats. What factors might influence the decision whether to acquire boats, sell boats, or remain at the current number of boats? Explain.
Number of Fishermen Daily Tuna Catch (Ib) 0 50 110 200 350 490 565 600 625 610 2 6Explanation / Answer
a) At 5th fishermam diminishing returns occur. Because the Marginal Product (MP) starts decreasing at 5th fisherman.
b) If the daily wage rate is $100, the company should use 7 fishermams. Because at 7 number of fisherman, Value of Marginal Product (VMP) is greater than the wage rate. If the company will hire more than 7 fisherman, the Wage rate will be greater than VMP. So, the company will incur loss.
c)
If the price to fall to $2.75/pound, the company should use 6 fishermams. Because at 6 number of fisherman, Value of Marginal Product (VMP) is greater than the wage rate. If the company will hire more than 6 fisherman, the Wage rate will be greater than VMP. So, the company will incur loss.
d)
If the price to fall to $5/pound, the company should use 8 fishermams. Because at 8 number of fisherman, Value of Marginal Product (VMP) is greater than the wage rate. If the company will hire more than 6 fisherman, the Wage rate will be greater than VMP. So, the company will incur loss.
No. of fisherman Daily Tuna catch(lb) MP VMP($) = $3.50 * MP 0 0 1 50 50 175 2 110 60 210 3 200 90 315 4 350 150 525 5 490 140 490 6 565 75 262.5 7 600 35 122.5 8 625 25 87.5 9 610 -15 -52.5Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.