Asked by Delaney Colleen on Jun 05, 2024
Verified
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. Refer to the information given.If the market price of sockeye salmon is $15 per ton,what is the maximum amount Kara would be willing to pay per ton for Kyle's ITQs?
A) $3.
B) $7.
C) $8.
D) $15.
ITQs
Individual Transferable Quotas, a common market-based tool used to regulate fishing efforts and conserve fish stocks by allocating specific catch limits to fishers.
Sockeye Salmon
A species of salmon found in the Pacific Ocean, known for its red flesh and significant role in commercial fishing and ecological balance.
- Grasp the concepts and economic implications of Individual Transferable Quotas (ITQs) in fisheries.
Verified Answer
FG
Fernanda GarciaJun 05, 2024
Final Answer :
B
Explanation :
Kara's profit per ton would be $7 ($15 market price - $8 cost per ton), while Kyle's profit per ton would be $3 ($15 market price - $12 cost per ton). Therefore, Kara would be willing to pay up to $7 per ton for Kyle's ITQs, since she would still make a profit of $1 per ton ($7 profit from selling the salmon - $8 cost per ton). Any amount higher than $7 per ton would lower her profit or even make her incur losses.
Learning Objectives
- Grasp the concepts and economic implications of Individual Transferable Quotas (ITQs) in fisheries.