Question

Kelly and Leanne have identical marginal private cost curves and demand curves and use the same amount of land to graze their cows. They both have access to a common graxing area, which must only be maintained on a volunteer basis. If they had to maintain the land, if would cost each person an additional $200. The maximum sustainable quantity of graxing animals on the lased is 14. The graph depicts the marginal private cost curves and the farmers' individual demand curves, which are identical for each farmer. Assume that Kelly and Leanne do not contribute to maintaining the land. How many total cows will both farmers graze on the common? Is this sustainable?

Answer 1

Kelly and Leanne will likely graze more than the sustainable limit of 14 cows due to the lack of maintenance costs and the individual benefits from additional cows, resulting in the Tragedy of the Commons. This behavior is encouraged by the principle where individuals maximize profits by grazing more cows without considering the carrying capacity and long-term health of the land.

Step-by-step explanation:

The question involves the concept of common resources and the associated problem of overuse or overgrazing, known as the Tragedy of the Commons. In the given scenario, Kelly and Leanne are incentivized to graze as many cows as possible on the common land due to the individual benefits they receive from each additional cow. Since the land is maintained only on a volunteer basis and each additional cow would cost them nothing, both farmers will likely graze as many cows as they can, potentially exceeding the maximum sustainable quantity of 14 cows on the land. This behavior is unsustainable and would lead to degradation of the grazing land, mirroring the economic principle discussed by economists such as William Forster Lloyd and later Garrett Hardin.

Without any incentive to maintain the land and facing an additional cost of $200 for maintenance, both Kelly and Leanne would try to maximize their profits by grazing more cows, disregarding the carrying capacity of the land. If we follow the logic of the marginal cost and marginal revenue example provided, once the number of cows grazed by each farmer exceeds the sustainable limit, the marginal costs (in terms of land degradation) will surpass the marginal benefits (from additional grazing), but these costs are not borne by the individual farmers. As such, they have no incentive to restrict the number of cows to the sustainable figure of 14, and the total number of cows grazed is likely to be higher than this sustainable number, resulting in overgrazing and environmental degradation.

Answer 2

Kelly and Leanne will likely graze a total of 80 cows on the common grazing area, but this may not be sustainable due to exceeding the maximum sustainable quantity of 14 cows.

Kelly and Leanne have identical marginal private cost curves and demand curves, and both use the same amount of land to graze their cows. The cost of maintaining the common grazing area is $200 for each person. The maximum sustainable quantity of grazing animals on the land is 14. If both Kelly and Leanne do not contribute to maintaining the land, they will likely graze more cows on the common.

To determine the total number of cows both farmers will graze on the common, we need to find the quantity where their combined marginal private cost equals their combined demand. Using the graph, we can see that at a price of $4, the quantity is 80. So, both farmers will likely graze a total of 80 cows on the common.

Although both farmers can graze a total of 80 cows on the common, this may not be sustainable in the long run. The maximum sustainable quantity of grazing animals on the land is only 14, so grazing 80 cows exceeds the carrying capacity of the land, leading to potential ecological and economic consequences.