Suppose the Alaskan king crab harvest is unregulated and any person with a crab boat and some diesel fuel can go offshore,lower a crab pot,and harvest king crab.As a result,this common resource is overused.Which policy choice might produce the socially optimal king crab harvest?

A) Alaska subsidizes the purchase of crab boats.
B) Alaska auctions a limited number of licenses to harvest king crab.
C) Alaska removes taxes on diesel fuel,which lowers the price of diesel.
D) The U.S.and Canadian governments remove trade barriers,which allows for more trade of products like king crab.

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Nataliya Volkova · Accepted Answer

Final Answer : B, Explanation :  By auctioning a limited number of licenses to harvest king crab, Alaska can control the number of crab boats and pots allowed in the water. This will limit the overuse of the resource and ensure that the harvest is socially optimal. Subsidizing the purchase of crab boats (A) would only encourage more people to enter the market and exacerbate the problem of overuse. Removing taxes on diesel fuel (C) may lower the cost of harvesting, but it will not address the issue of overuse. Removing trade barriers (D) may increase demand for king crab, but it will also increase the pressure on the resource and may lead to even greater overuse.

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