The increased efficiency of fishing has led to which of the following outcomes related to externalities?

• A. An increase in fish populations due to better resource management
• B. A reduction in market prices with no impact on the environment
• C. Overfishing and depletion of fish stocks, resulting in negative social costs
• D. Greater social benefits without any associated external costs

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of externalities, which are costs or benefits that affect third parties who are not directly involved in an economic transaction. In this case, fishing efficiency impacts the environment and society beyond just the fishermen and consumers.
2. Step 2: Recognize that increased efficiency in fishing typically means catching fish faster or in larger quantities, which can lead to overexploitation of fish stocks if not properly regulated.
3. Step 3: Analyze the potential outcomes: increased efficiency could lead to better resource management (positive externality), no environmental impact (unlikely), or overfishing and depletion of fish stocks (negative externality).
4. Step 4: Identify that overfishing results in negative social costs because it reduces fish populations below sustainable levels, harming the ecosystem and future fishing opportunities.
5. Step 5: Conclude that the increased efficiency of fishing most commonly leads to overfishing and depletion of fish stocks, which is a negative externality causing social costs beyond the private costs faced by fishermen.