Melanie and Oli are competing Pacific halibut fishers. Both have been allocated ITQs that limit their catch to 1,000 tons of Pacific halibut each. Melanie's cost per ton is $20; Oli's cost per ton is $28. Assume that the market price of Pacific halibut is $40 per ton. If Melanie pays Oli $10 per ton for his ITQs and then catches her new limit of 2,000 tons, her profit would be

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Quizplus · Accepted Answer

Melanie's cost for catching 2,000 tons at $20 per ton is $40,000. She sells the halibut for $40 per ton, making $80,000. She pays Oli $10 per ton for 1,000 tons, costing $10,000. Her profit is $80,000 (revenue) - $40,000 (cost of catching) - $10,000 (payment to Oli) = $30,000.

Melanie and Oli Are Competing Pacific Halibut Fishers