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 $7; Kyle's cost per ton is $11. Assume that the market price of sockeye salmon is $16 per ton. If Kara pays Kyle $6 per ton for his ITQs, and if she then catches her new limit of 4,000 tons, her profit would be

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Kara's profit is calculated as follows: Revenue from selling 4,000 tons at $16 per ton is $64,000. Her cost for catching 4,000 tons at $7 per ton is $28,000. She pays Kyle $6 per ton for 2,000 tons, which is $12,000. Therefore, her total cost is $28,000 + $12,000 = $40,000. Her profit is $64,000 - $40,000 = $24,000.

Kara and Kyle Are Competing Sockeye Salmon Fishers