Asked by Fitri Hj Ahmad on Apr 28, 2024
Verified
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. Refer to the information given and 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,their combined profit would be:
A) $28,000.
B) $32,000.
C) $30,000.
D) $54,000.
Combined Profit
The total profit earned by all firms in a particular market or industry, summed together.
- Learn about the notions and economic significance of Individual Transferable Quotas (ITQs) in the context of fishing activities.
Verified Answer
SR
Samuel RezendeApr 30, 2024
Final Answer :
C
Explanation :
Melanie's profit from catching 2,000 tons at $40 per ton, minus her cost of $20 per ton, equals $40,000. She pays Oli $10 per ton for 1,000 tons, costing her $10,000. Oli's profit is $10,000 from selling his ITQs. Combined, their profit is $40,000 (Melanie's profit) + $10,000 (Oli's profit from selling ITQs) - $10,000 (cost to Melanie for buying ITQs) = $40,000.
Learning Objectives
- Learn about the notions and economic significance of Individual Transferable Quotas (ITQs) in the context of fishing activities.