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
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Chapter 19 Solutions
Gen Combo Microeconomics; Connect Access Card
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