Question

5. (Sustainability) (12 pts) Is market failure harmful to sustainability? Use open access as an example to explain. 18 (6) 16- constant average yield decreasing absolutely average decreasing yield yield maximum yield tonnes of fish caught 12- constant 10 average yield decreasing average yield absolutely decreasing yield yield of open access resource sustainable resource unsustainable resource use 0 3 number of fishing boats maximum sustainable yield number of users of open access resource

Answer 1

Sustainability refers to the ability of something to be
maintained for future or preserved over time. It can be explained in terms of the joint preservation of the environment and the economy: for the environment it refers to environmental preservation (lack of destruction)for the economy it refers to the preservation of humankind’s ability to provide goods and services to satisfy needs and wants into the future.

Open access resources are rivalrous and non - excludable goods that is they are public goods. A good is rivalrous when its use by some people reduces availability for others. A good is non-excludable when it is not possible to exclude anyone from using it.The lackof a pricing mechanism for common access resources means that these goods may be overused/depleted/degraded as a result of activities of producers and consumers who do not pay for the resources they use, and that this poses a threat to sustainability.

When vehicles, factories or induatries use fossil fuels
that emit pollutants into the atmosphere or into
oceans, rivers and lakes, they ‘overuse’ a portion of
these natural resources without paying for them. Some of these activities result in ozone depletion, with
harmful effects on life from the sun’s radiation; they
‘overuse’ part of the ozone layer. They also give rise
to global warming, with possibly devastating effects
on agriculture, health and ecosystems; this involves
‘overusing’ the benefi ts provided by a stable global
climate.