Senegal’s Fishermen Blame BP Project for Lack of Fish

EconEye Admin

8 months ago

BP’s gas project on the Mauritania–Senegal maritime border, a prime fishing area, created a 500-meter exclusion zone over a natural reef, rich in fish. Fisherman income has dropped significantly. BP pledged eight artificial reefs to restore their livelihood.—bbc.com

Answer the following questions to check your understanding of the story.

What type of externality is described in the news clip?

a) Positive consumption externality

b) Positive production externality

c) Negative consumption externality

d) Negative production externality

Wrong! - Does the externality in the news clip arise from consumption? Is the externality in the news clip a positive externality?

Well Done! - A negative production externality is a cost that arises from production and that falls on someone other than its producer. By making a reef full of fish unavailable to fishermen, BP has created a negative production externality.

What is the effect of BP’s commitment to build eight artificial reefs?

a) BP maximizes gas production and fishermen maximize their catches.

b) BP receives an external benefit from its actions to help fishermen.

c) The external cost that fishermen inflict on BP gas production is eliminated.

d) BP faces its external cost of gas production, and gas production becomes more efficient.

Wrong! - How do BP and fishermen maximize profit? Who is inflicting the external cost? Does BP receive an external benefit by building artificial reefs?

Correct! - By building the artificial reefs, BP faces the total cost—the private cost and the external cost—of its gas project and gas production becomes more efficient.

Share this: