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 $6; Kyle's cost per ton is $10. If the market price of sockeye salmon is $14 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 make a profit of $8 per ton ($14 market price - $6 cost per ton). Therefore, she would be willing to pay up to $8 per ton for Kyle's ITQs to maintain her profit margin.

Kara and Kyle Are Competing Sockeye Salmon Fishers