In Maine, you must have a license to harvest lobster commercially; these licenses are issued yearly. The state of Maine is
concerned about the dwindling supplies of lobsters found off
its coast. The state fishery department has decided to place a
yearly quota of 80,000 pounds of lobsters harvested in all
Maine waters. It has also decided to give licenses this year only
to those fishermen who had licenses last year. The accompanying figure shows the demand and supply curves for Maine
lobsters.
e. Find an excise tax that achieves the same reduction in the
harvest of lobsters. Show it on the figure. What is the government revenue collected from this tax?
f. Explain a transaction that benefits both buyer and seller
but is prevented by the quota restriction. Explain a transaction that benefits both buyer and seller but is prevented
by the excise tax.