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What Would it be Worth to Create a Hawaiian Tuna Monopoly? The daily demand for wholesale Tuna in Hawaii is given by P = $6.24

What Would it be Worth to Create a Hawaiian Tuna Monopoly?

The daily demand for wholesale Tuna in Hawaii is given by P = $6.24 - 0.00016Q, where P is the price per pound and Q is the daily catch, in pounds.

The average daily price over the days in 2017 was $4.28 per pound. Because there is free entry, we have drawn the inference that the price just covers the average cost. Let's further assume that more or few boats could be operated without changing the average cost of harvesting tuna. Indeed, let's say that TC = $4.28Q, so that MC=AC=$4.28.

  1. Make a picture of the competitive market outcome, using the demand curve above and the long run supply curve implied by the constant average cost assumption. What are the price and quantity?

  1. Suppose that you could get all of the boats in the fleet into a single firm. (Suppose further, that you could control further entry into Tuna fishing in Hawaii).If your goal were to maximize profits, how many pounds would you seek to harvest per day? Illustrate, and derive to profit-maximizing quantity, the price, and the daily profit for the firm. What is annual profit, given that the marketplace operates 6 days per week?

  1. What are some obstacles to the creation of a Hawaiian tuna fishing collective? And can you think of any ways to make it work?

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