Suppose That in Horsehead, Massachusetts, the Cost of Operating a Lobster

question 4

Multiple Choice

Suppose that in Horsehead, Massachusetts, the cost of operating a lobster boat is $4,000 per month. Suppose that if x lobster boats operate in the bay, the total monthly revenue from lobster boats in the bay is $1,000(12x - x²) . If there are no restrictions on entry and new boats come into the bay until there is no profit to be made by a new entrant, then the number of boats who enter will be X₁. If the number of boats that operate in the bay is regulated to maximize total profits, the number of boats in the bay will be X₂.

• A) X₁ = 8 and X₂ = 8.
• B) X₁ = 4 and X₂ = 2.
• C) X₁ = 8 and X₂ = 4.
• D) X₁ = 12 and X₂ = 8.
• E) None of the above.

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Definitions:

Communism

An economic system characterized by collective ownership of most resources and central planning.

Modified Version

A version that has been altered or adjusted from its original form.

Socialist Economy

An economic system where the means of production, distribution, and exchange are owned or regulated by the community as a whole.

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.