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. Assume that the market price of sockeye salmon is $15 per ton. If Kara pays Kyle $5 per ton for his ITQs, and if she then catches her new limit of 4,000 tons, her profit would be

Question

Quizplus · Accepted Answer

Kara's profit is calculated as follows: Revenue from 4,000 tons at $15 per ton is $60,000. Her cost for 4,000 tons at $8 per ton is $32,000. She pays Kyle $5 per ton for 2,000 tons, totaling $10,000. Therefore, her profit is $60,000 - $32,000 - $10,000 = $18,000.

Kara and Kyle Are Competing Sockeye Salmon Fishers