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

question 3

Multiple Choice

Suppose that in Horsehead, Massachusetts, the cost of operating a lobster boat is $2,000 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(26x - 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 = 24 and X₂ = 12.
• B)X₁ = 24 and X₂ = 24.
• C)X₁ = 12 and X₂ = 10.
• D)X₁ = 28 and X₂ = 16.
• E)None of the above.

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Definitions:

Production Possibilities Curves

A graphical representation that shows the maximum number of goods or services that can be produced with limited resources.

Constant Costs

Costs that do not change with the level of output production, remaining stable over a certain range of production.

Increasing Costs

A scenario where the costs of producing goods or services trend upwards over time, affecting profitability and pricing strategies.

World Price

The international market price of a good or service, determined by world demand and supply.