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, and Kara and Kyle both catch their quota, their combined profit will be

Question

Quizplus · Accepted Answer

Kara's total cost to catch 2,000 tons of sockeye salmon is:

$8 x 2,000 tons = $16,000

Her revenue from selling 2,000 tons of sockeye salmon is:

$15 x 2,000 tons = $30,000

Her profit is:

$30,000 - $16,000 = $14,000

Kyle's total cost to catch 2,000 tons of sockeye salmon is:

$12 x 2,000 tons = $24,000

His revenue from selling 2,000 tons of sockeye salmon is:

$15 x 2,000 tons = $30,000

His profit is:

$30,000 - $24,000 = $6,000

Therefore, their combined profit is:

$14,000 + $6,000 = $20,000

Kara and Kyle Are Competing Sockeye Salmon Fishers