Consider a Lake Stocked with Fish

question 52

Essay

Consider a lake stocked with fish.The total value of fish caught at the lake depends on the number of fishers,as shown in the accompanying table.As the table indicates,1 fisher can catch $36 worth of fish in a day,2 fishers can catch a total of $66 worth of fish,3 fishers can catch a total of $90 worth of fish,and so forth.The fishers are identical,and the opportunity cost of a day at the lake is $18 for each fisher.

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Definitions:

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm operates on a larger scale due to inefficiencies that arise.

Long-Run Average Cost

The per-unit cost of production in the long run, where all inputs are variable and economies of scale have been reached.

Marginal Cost

The cost incurred in producing one additional unit of a product or service.

Average Total Cost

The sum of all production costs divided by the quantity of output produced, representing the per-unit cost of production.