Kara and Kyle are competing sockeye salmon fishers. Both have been allocated ITQs that limit their catch to 2,000 tons of sockeye salmon each. Kara's cost per ton is $8; Kyle's cost per ton is $12. If the market price of sockeye salmon is $15 per ton, what is the maximum amount Kara would be willing to pay per ton for Kyle's ITQs?

Question

Quizplus · Accepted Answer

Kara would be willing to pay up to $7 per ton for Kyle's ITQs because she can sell the fish at $15 per ton and her cost is $8 per ton, leaving her a profit of $7 per ton.

Kara and Kyle Are Competing Sockeye Salmon Fishers