Fishing Rights

Well Done! - Ocean mackerel is a common resource because it is rival—it can be consumed only once—and nonexcludable—anyone with a boat and equipment can fish for it.

The tragedy of the commons is the overuse of a common resource that arises when its users have no incentive to conserve and use it sustainably.

Good Job! - A negative production externality arises when production activity of a fisher affects someone other than the given fisher.

When a fisher catches mackerel, the remaining mackerel stock decreases, which makes it harder for other fishers to find and catch fish.

That's Right! - To achieve an efficient outcome, a production quota could be set at the quantity at which marginal social cost equals marginal social benefit.

Correct! - Fishers catch a quantity greater than the production quota because the price of mackerel is greater than the marginal private cost incurred to catch it. So, fishers increase profit by fishing more than the production quota.

Nice Work! - An individual transferable quota is a production quota assigned to a fisher who is then free to transfer (sell) it to some other fisher.

Setting the ITQ price equal to marginal social benefit minus marginal cost makes fishers face the opportunity cost of using the common resource and the self-interest of each fisher achieves the social interest.