Fig. 7 Bioeconomic Model

*Note: the two figures are not drawn using the same scale.*

In Fig. 7 Panel B, which point best represents the open-access equilibrium with a Pigouvian tax?

Question

Fig. 7 Bioeconomic Model

*Note: the two figures are not drawn using the same scale.*

In Fig. 7 Panel B, which point best represents the open-access equilibrium with a Pigouvian tax?

BlackTom AI · Accepted Answer

Open-access equilibrium is reached where entry drives profits to zero, so average revenue per unit of effort equals average cost (AR = AC). A Pigouvian tax implemented as a per-unit harvest tax either reduces the net price received by each harvester (shifting the AR curve down) or raises their effective cost (shifting AC up). In either case the free-entry, open-access outcome is the new intersection where the taxed average revenue equals average cost.

Relevant knowledge points and concepts
- Open-access equilibrium (free entry): profits = 0, so AR = AC at equilibrium.
- Pigouvian (per-unit) tax: internalizes an externality by reducing net revenue per unit or increasing effective cost; graphically this moves the AR curve downwards (or AC upwards).
- The chosen equilibrium after the tax is where the post-tax AR curve crosses the AC (or post-tax AC) curve.

Step-by-step reasoning
1. Identify curves in Panel B: the horizontal line labeled AC_E = MC_E = c is the constant average cost; a downward-sloping AR_E is the average revenue per unit of effort. MR_E is the marginal revenue line below AR.
2. Applying a Pigouvian tax reduces net revenue per unit, shifting the AR curve down (or equivalently raises effective costs); free entry then drives effort until AR (after-tax) equals AC.
3. Locate the point in the figure where the (after-tax) AR curve intersects the horizontal AC line. That intersection marks zero profits and therefore the open-access equilibrium under a tax.
4. Point S in Panel B is exactly at this intersection (AR after tax = AC), so it represents the open-access equilibrium with a Pigouvian tax.

Why the correct answer is correct
- S is the intersection of the taxed AR and the AC line, so it satisfies AR = AC (zero profits under free entry) after the tax is applied.

Why other options are incorrect (brief)
- R is above AC and corresponds to a point where marginal considerations rather than zero profit hold (not AR = AC).
- Q and U lie where marginal revenue or other locus cross, not at AR = AC.
- T marks a different effort level (often the pre-tax open-access or a marginal-revenue intersection) rather than the post-tax, zero-profit intersection.

Conclusion
Because open-access with a per-unit (Pigouvian) tax is given by the intersection of the after-tax average revenue curve with average cost, the correct point in Panel B is S, matching the provided answer.

Fig. 7 Bioeconomic Model Note: the two figures are not drawn using the same scale. In Fig. 7 Panel B, which point best represents the open-access equilibrium with a Pigouvian tax? 单项选择题

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Fig. 7 Bioeconomic Model *Note: the two figures are not drawn using the same scale.* In Fig. 7 Panel B, which point best represents the open-access equilibrium with a Pigouvian tax? 单项选择题