Restrictions on entry and amount of goods produced in production and retail busi

Question

Restrictions on entry and amount of goods produced in production and retail business are usually objected to by economists. Indeed, such restrictions are considered a major source of divergence between the marginal willingness to pay and the marginal opportunity cost of production. Yet, when it comes to policy prescriptions concerning an open access fishery, economists argue for such restrictions. Solutions to the open access problems in a fishery include: a) tax on catch, b) quota on the type and pounds of fish caught, c) limiting the number of boats, and d) limits on capital (gear restrictions). Provide an explanation indicating why restrictions placed on open access fisheries can increase aggregate wealth. Discuss the efficiency aspects of each of the proposed solutions including a discussion of wealth effects

Explanation / Answer

The restrictions placed on open access fisheries can increase aggregate wealth because it would lead to increase in revenues which balances expenditure done by the firms to increase business. It helps to increase effective outputs and increase wages of workers inthe industries. It helps to increase the outputs even more. The wealth is increased when there is reduction in tax. If there is more income there has to be more revenues earned due to progressive demand and supply of products.

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