Asked by Priscila Troche on Apr 29, 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. If the market price of Pacific halibut is $40 per ton, and Melanie and Oli both catch their quota, their combined profit will be
A) $12,000.
B) $22,000.
C) $32,000.
D) $25,000.
ITQs
Individual Transferable Quotas, a regulatory tool used in managing resources by allotting specific quantities that can be harvested or produced, often applied in fisheries to prevent overfishing.
Pacific Halibut
A species of flatfish highly valued as food, found in the North Pacific Ocean.
Market Price
The current price at which an asset or service can be bought or sold in a marketplace, determined by supply and demand dynamics.
- Absorb the essential details of Individual Transferable Quotas (ITQs) and their implementation in fishery management.
- Acquire knowledge on the basic tenets and consequences of negotiations and market transactions in the administration of resources.
Verified Answer
AR
Angelina RaindanceMay 03, 2024
Final Answer :
C
Explanation :
Melanie's profit = (Market price - Cost per ton) * Quantity = ($40 - $20) * 1000 = $20,000. Oli's profit = ($40 - $28) * 1000 = $12,000. Combined profit = $20,000 + $12,000 = $32,000.
Learning Objectives
- Absorb the essential details of Individual Transferable Quotas (ITQs) and their implementation in fishery management.
- Acquire knowledge on the basic tenets and consequences of negotiations and market transactions in the administration of resources.