Concept explainers
Sub Part (a):
The decision-making process related to power plant.
Sub Part (a):
Explanation of Solution
The total cost of catching 30 tons of fish by ‘ER’ can be calculated as follows:
To catch 30 tons, the cost for ‘ER’ is $6,000.
The total cost of catching 30 ton fish by ‘KY’ can be calculated as follows:
To catch 30 tons, the cost for ‘KY’ is $66,000.
Since the total cost of fishing for ‘KY’ is less than the other person, ‘KY’ should catch the entire fist.
The average cost can be calculated as follows:
The average cost is $2,200 per ton.
Concept introduction:
Decision-making process: The decision-making process refers to the process of finalizing the choice between the available alternatives through collecting respective information and assessing it.
Sub Part (b):
The decision-making process related to power plant.
Sub Part (b):
Explanation of Solution
The first five ton cost of fishing for ‘ER’ is less than the ‘KY’. The additional ton cost for ‘ER’ is greater than the additional cost of ‘KY’. Thus, first 5 tons should be caught by ‘ER’ and the remaining fish should be caught by ‘KY’. The total cost for this combination can be calculated as follows:
The total cost is $64,000.
The average cost can be calculated as follows.
The average cost is $2,133.33 per ton.
Concept introduction:
Decision-making process: The decision-making process refers to the process of finalizing the choice between the available alternatives through collecting respective information and assessing it.
Sub Part (c):
The ER's profit.
Sub Part (c):
Explanation of Solution
ER’s total profit can be calculated as follows.
ER’s total profit is $22,500. ER’s total profit after selling 25 tons can be calculated as follows.
ER’s total profit after selling the ITQ is $23,750.
Sub part (d):
Who would be willing to offer $500 for additional 25 tons.
Sub part (d):
Explanation of Solution
The person ER can earn $500
Want to see more full solutions like this?
- Newfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.arrow_forwardFrom the list below, select the characteristics thatdescribe a good economic model. [LO 1.6]a. Includes every detail of a given situation.b. Predicts that A causes B.c. Makes approximately accurate assumptions.d. Fits the real world perfectly.e. Predicts things that are usually true.arrow_forwardSuppose that three volunteers are preparingcookies and cupcakes for a bake sale. Diana canmake 27 cookies or 18 cupcakes per hour; Andycan make 25 cookies or 17 cupcakes; and Sam canmake 10 cookies or 12 cupcakes. [ LO 2.2]a. Who has the absolute advantage at makingcookies?b. At making cupcakes?arrow_forward
- Think about how and why goods and resourcesare scarce. Goods and resources can be scarcefor reasons that are inherent to their nature at alltimes, temporary or seasonal, or that are artificially created. Separate the goods listed below into two groups; indicate which (if any) are artificiallyscarce (AS), and which (if any) are inherentlyscarce (IS). [LO 1.1]a. air of any qualityb. landc. patented goodsd. original Picasso paintingsarrow_forwardSuppose the marginal benefit of writing a contract is $100, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is: (LO3) a. MC(L) = 30 + 4L. b. MC(L) = 40 + 5L. c. What happens to the optimal contract length when the marginal cost of writing a contract declines?arrow_forwardThe accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities A B C D E Tea 120 90 60 30 0 Pots 0 30 60 90 120 Sigma's production possibilities A B C D E Tea 40 30 20 10 0 Pots 0 30 60 90 120 What are the limits of the terms of trade between Gamma and Sigma? Multiple Choice 1 tea = 2 pots to 1 tea = 6 pots 1 tea = 3 pots to 1 tea = 6 pots 1 tea = 2 pots to 1 tea = 3.5 pots 1 tea = 1 pot to 1 tea = 3 potsarrow_forward
- Abdul’s utility function is given by U A 5 M A 2 y M B , where M A is Abdul’s wealth level and M B is Benjamin’s wealth level. Benjamin’s utility function is given by (LO1) U B 5 M B 2 y M A . Suppose M A 5 M B 5 10 initially, and suppose there is a joint project that Ab dul and Benjamin can undertake that will generate an additional 10 units of wealth to divide between them. The project is neither pleasant nor unpleasant. What is the minimum payment Abdul must be given to secure his agreement to perform the project? What is the minimum payment Benjamin must be given? Will they perform the project? (LO1)arrow_forwardYour friend Sam has been asked to prepare appetizers for the university reception. She has anunlimited amount of ingredients and 6 hours inwhich to prepare them. Sam can make 300 minisandwiches or 150 servings of melon slices toppedwith smoked salmon and a dab of sauce per hour.[LO 2.1]a. What is Sam’s opportunity cost of makingone mini-sandwich?b. What is Sam’s opportunity cost of baking onemelon appetizer?c. Suppose the reception has been postponed,and Sam has an extra 4 hours to prepare.What is the opportunity cost of making onemini-sandwich now?d. Suppose the reception has been postponed,and Sam has an extra 4 hours to prepare.What is the opportunity cost of making onemelon appetizer now?e. Suppose Sam’s friend Chris helpsby preparing the melon slices, increasingSam’s productivity to 300 mini-sandwichesor 300 melon appetizers per hour. What isthe opportunity cost of making one minisandwich now?f. Suppose Sam’s friend Chris helps by preparing the melon slices, increasing…arrow_forwardThe figure below shows the market for large bags of potato chips. Market for Potato Chips in large bag units Price ($) 7 LO LO 5 3 2 1 0 10 20 30 40 50 60 70 80 90 100110120 S Darrow_forward
- 3. Consider a Factory town model. Draw a market area graph for a single factory (hint: similar to figure 2-1) with a shirt cost at the factory of 0.5 bread and a shirt cost at home of 1 bread. Now, suppose that gluten-addicted aliens have invaded our factory town, and with a small probability, will abduct people walking to the factory and steal half of their bread. This makes traveling to the factory more costly on average. What will this do to the overall size of the factory town? Copy your graph from before, but this time add the change to the graph.arrow_forwardAssume China has 10,000 workers. Suppose that each Chinese worker produces either 30 pairs of boots or 10 software per month. Suppose that half of Chinese workers produce boots and half produce programs. What quantities of boots and software does China produce? Are these production combinations efficient? Select one: O a. China produces 50,000 pairs of boots and 150,000 software per month. These production combinations are efficient O b. China produces 150,000 pairs of boots and 50,000 software per month. These production combinations are efficient. O c. China produces 50,000 pairs of boots and 150,000 software per month. These production combinations are not efficient. O d. China produces 150,000 pairs of boots and 50,000 software per month. These production combinations are not efficient.arrow_forwardSuppose that there are three beachfront parcels of land available for sale in Asilomar and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $445,000. The following table states each person's willingness and ability to purchase a parcel. Person Willingness and Ability to Purchase (Dollars) Ana 510,000 Charles 470,000 Dina 420,000 Gilberto 390,000 Juanita 380,000 Yakov 600,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. A. Ana B. Charles C. Dina D. Gilberto E. Juanita F. Yakov Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $432,500. This fourth…arrow_forward