Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a campground whose visitors use the lake for recreation. The town also has a chemical plant that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical plant's waste decreases the campground's economic profit. Suppose that the chemical plant could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the campground would no longer be affected. If the chemical plant uses the recycling method, then the chemical plant's economic profit is $1,500 per week, and the campground's economic profit is $2,800 per week. If the chemical plant does not use the recycling method, then the chemical plant's economic profit is $2,300 per week, and the campground's economic profit is $1,600 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the chemical plant's economic profit and the campground's economic profit combined) with and without recycling. Action Profit Chemical Plant Campground Total (Dollars) (Dollars) (Dollars) No Recycling 2,300 1,600 Recycling 1,500 2,800 Total economic profit is highest when the recycling production method isused . When the chemical plant uses the recycling method, the campground earns $2,800−$1,600=$1,200$2,800−$1,600=$1,200 more per week than it does with no recycling. Therefore, the campground should be willing to pay up to $1,200 per week for the chemical plant to recycle water. However, the recycling method decreases the chemical plant's economic profit by $2,300−$1,500=$800$2,300−$1,500=$800 per week. Therefore, the chemical plant should be willing to use the recycling method if it is compensated with at least $800 per week. Suppose the campground has the property rights to the lake. That is, the campground has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method and will pay the campground per week. Now, suppose the chemical plant has the property rights to the lake, including the right to pollute it. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method, and the campground will pay the chemical plant per week. The chemical plant will make the most economic profit when . True or False: The lake will remain polluted, regardless of who has the property rights. True False

Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a campground whose visitors use the lake for recreation. The town also has a chemical plant that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical plant's waste decreases the campground's economic profit. Suppose that the chemical plant could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the campground would no longer be affected. If the chemical plant uses the recycling method, then the chemical plant's economic profit is $1,500 per week, and the campground's economic profit is $2,800 per week. If the chemical plant does not use the recycling method, then the chemical plant's economic profit is $2,300 per week, and the campground's economic profit is $1,600 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the chemical plant's economic profit and the campground's economic profit combined) with and without recycling. Action Profit Chemical Plant Campground Total (Dollars) (Dollars) (Dollars) No Recycling 2,300 1,600 Recycling 1,500 2,800 Total economic profit is highest when the recycling production method isused . When the chemical plant uses the recycling method, the campground earns $2,800−$1,600=$1,200$2,800−$1,600=$1,200 more per week than it does with no recycling. Therefore, the campground should be willing to pay up to $1,200 per week for the chemical plant to recycle water. However, the recycling method decreases the chemical plant's economic profit by $2,300−$1,500=$800$2,300−$1,500=$800 per week. Therefore, the chemical plant should be willing to use the recycling method if it is compensated with at least $800 per week. Suppose the campground has the property rights to the lake. That is, the campground has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method and will pay the campground per week. Now, suppose the chemical plant has the property rights to the lake, including the right to pollute it. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method, and the campground will pay the chemical plant per week. The chemical plant will make the most economic profit when . True or False: The lake will remain polluted, regardless of who has the property rights. True False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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answer all please 4. The effects of property rights on achieving efficiency

Consider a lake found in the town of Center Barnstead, and then answer the questions that follow.

The town has a campground whose visitors use the lake for recreation. The town also has a chemical plant that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical plant's waste decreases the campground's economic profit.

Suppose that the chemical plant could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the campground would no longer be affected. If the chemical plant uses the recycling method, then the chemical plant's economic profit is $1,500 per week, and the campground's economic profit is $2,800 per week. If the chemical plant does not use the recycling method, then the chemical plant's economic profit is $2,300 per week, and the campground's economic profit is $1,600 per week. These figures are summarized in the following table.

Complete the following table by computing the total profit (the chemical plant's economic profit and the campground's economic profit combined) with and without recycling.

Action	Profit
Chemical Plant	Campground	Total
(Dollars)	(Dollars)	(Dollars)
No Recycling	2,300	1,600
Recycling	1,500	2,800	Total economic profit is highest when the recycling production method isused . When the chemical plant uses the recycling method, the campground earns $2,800−$1,600=$1,200$2,800−$1,600=$1,200 more per week than it does with no recycling. Therefore, the campground should be willing to pay up to $1,200 per week for the chemical plant to recycle water. However, the recycling method decreases the chemical plant's economic profit by $2,300−$1,500=$800$2,300−$1,500=$800 per week. Therefore, the chemical plant should be willing to use the recycling method if it is compensated with at least $800 per week. Suppose the campground has the property rights to the lake. That is, the campground has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method and will pay the campground per week. Now, suppose the chemical plant has the property rights to the lake, including the right to pollute it. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method, and the campground will pay the chemical plant per week. The chemical plant will make the most economic profit when . True or False: The lake will remain polluted, regardless of who has the property rights. True False

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