FIVE-PART QUESTION

3a. 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. 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, her profit would be

Multiple Choice

a. $20,000.

b. $32,000.

c. $30,000.

d. $40,000.

3b. 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 $26; Oli's cost per ton is $30. If the market price of Pacific halibut is $45 per ton, and Melanie and Oli both catch their quota, their combined profit will be

Multiple Choice

e.$15,000.

f. $19,000.

g. $34,000.

h. $45,000.

3c. 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 $25. If the market price of Pacific halibut is $35 per ton, what is the minimum amount per ton that Melanie would have to offer Oli to convince him to sell Melanie his ITQs?

Multiple Choice

i. $5.

j. $12.

k. $10.

l. $15.

3d. 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 $36; Oli's cost per ton is $40. If the market price of Pacific halibut is $48 per ton, what is the maximum amount Melanie would be willing to pay per ton for Oli's ITQs?

Multiple Choice

m. $8.

n. $40.

o. $12.

p. $48.

3e.

A Middle Eastern country has an oil reserve that it can extract for a profit of $150 a barrel today, $190 a barrel in two years, $200 a barrel in three years, and $220 in four years. The current market rate of interest is 10 percent. When should this country tap into its oil reserve to obtain the most profit per barrel in present value terms?

Multiple Choice

three years

four years

today

two years