Kara and Kyle Are Competing Sockeye Salmon Fishers

question 191

Multiple Choice

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

• A)$4,000.
• B)$20,000.
• C)$18,000.
• D)$22,000.

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Definitions:

EBIT

Known as Earnings Before Interest and Taxes, this financial gauge calculates a firm's profitability without considering interest and income tax charges.

Average Collection Period

The average number of days it takes for a company to collect payments from its customers, a measure of the efficiency of its credit policies.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Quick Ratio

A measure of a company's short-term liquidity, calculated as (Current Assets - Inventory) / Current Liabilities, indicating how well a company can meet its short-term financial liabilities.