Consider a negative externality

	How Humans Impact on Fisheries
	How We Conserve our Fisheries
	Background Information

Background information
An example of a negative externality in the fishing industry is by-catch - when fishing accidentally kills other fish species, birds and marine mammals. Fishing companies are prohibited by government regulation from killing more than is considered socially desirable or efficient. This issue is contentious and has values implications because marine mammals are protected under the Marine Mammals Protection Act 1978 and birds are protected under the Wildlife Act 1983. Killing birds and mammals is an emotive issue.

1	Match each letter from Graph 4 with the correct term from the list below.
		Social marginal benefit (SMB) curve	Graph 4
		Unregulated quantity of fish harvested
		Private marginal cost (PMC) curve
		Socially efficient quantity of fish harvested
		Welfare gain from regulation
		Equilibrium with no regulation of externality (SMB = PMC)
		Equilibrium under regulation of externality (SMB = SMC)
		Social marginal cost curve (SMC = PMC + external cost)
2	Explain in your own words what the graph tells you.
3	How do you think the problem of by-catch can be solved? Consider both economic and values issues.