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During the 1960s and 1970s in Perth, prawning with nets was a popular river pastime
During the 1960s and 1970s in Perth, prawning with nets was a popular river pastime. However, the practice died out for many years due to overfishing. In 2012, scientists started a process of re-populating the river with Swan River prawns, with the idea being to allow people to begin recreational fishing for prawns again. This appears to have been a success, and people are soon again going to be allowed to go prawning in the river.
A) What is the market failure issue identified here?
B) How would you design a system to try to prevent the same problem of overfishing occurring again?
Expert Solution
A)
Overfishing is the market failure here. Due to there was a negative market externality created. The people added with external cost to the environment and there was excessive demand for fish. The marginal social cost exceeded marginal private benefit for the riverine ecosystem and resulted in complete exhaustion of supply.
B)
To not to occur this problem again, the changes need to be made. The recreational fishing should be allowed for a certain period, maybe only on holidays. The fishing should be banned for the period of reproduction of fish. Even though fishing is allowed, there should be a demarcated area in the river for fishing, and not every area should be exploited. Fishing should not be free, some cost has to be incurred by the people. This collected money can be used for the periodical reintroduction of new fish varieties or an additional number of fish.
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