FOUR-PART QUESTION

5a. 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. Assume that the market price of sockeye salmon is $15 per ton. If Kara pays Kyle $5 per ton for his ITQs, and if she then catches her new limit of 4,000 tons, her profit would be

Multiple Choice

$4,000.

$20,000.

$18,000.

$22,000.

5b. 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 $7; Kyle's cost per ton is $11. If the market price of sockeye salmon is $16 per ton, and Kara and Kyle both catch their quota, their combined profit will be

Multiple Choice

$10,000.

$18,000.

$28,000.

$32,000.

5c. 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, what is the maximum amount Kara would be willing to pay per ton for Kyle's ITQs?

Multiple Choice

$3.

$8.

$7.

$15.

5d. An electricity company has the opportunity to use natural gas to generate electricity at a cost of $35 per unit in 3 years. The current market rate of interest is 6 percent. The present value of this cost is about

Multiple Choice

$42.

$37.

$33.

$29.