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Question 1:
Consider two dairy farms B and C. They send their cows to the commons. If farm B sends b cows and farm C sends c cows to the commons, the milk production (in kiloliters, kl) per cow is:
f (b,c) = 300 - (b + c)
This is the same for all cows of both farms. The cost of milk production is:
f (b, c) = 90 × z
If a farm keeps z cows, and this the same for both farms. The market price of milk per kl is 1.
a. Show that the commons will be over-exploited.
b. Suggest two solutions that the village chief can use to overcome the over exploitation of the commons by the two farms.
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