Consider a lake found in the village of Sturbridge, and then answer the questions that follow. The village has a kayak rental whose visitors use the lake for recreation. The village also has a fish processor that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the fish processor's waste decreases the kayak rental's economic profit. ·siamm Suppose that the fish processor 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 kayak rental would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,700 per week, and the kayak rental's economic profit is $2,100 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $2,300 per week, and the kayak rental's economic profit is $1,000 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the fish processor's economic profit and the kayak rental's economic profit combined) with and without recycling. NOV 24 m tv MacBook Pro ZA
Consider a lake found in the village of Sturbridge, and then answer the questions that follow. The village has a kayak rental whose visitors use the lake for recreation. The village also has a fish processor that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the fish processor's waste decreases the kayak rental's economic profit. ·siamm Suppose that the fish processor 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 kayak rental would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,700 per week, and the kayak rental's economic profit is $2,100 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $2,300 per week, and the kayak rental's economic profit is $1,000 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the fish processor's economic profit and the kayak rental's economic profit combined) with and without recycling. NOV 24 m tv MacBook Pro ZA
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Complete the following table by computing the total profit (the fish processor's economic profit and the kayak rental's economic profit combined) with
and without recycling.
Action
No Recycling
Recycling
Fish Processor
(Dollars)
2,300
1,700
Profit
Kayak Rental
(Dollars)
1,000
2,100
Total economic profit is highest when the recycling production method is
When the fish processor uses the recycling method, the kayak rental earns $2,100 - $1,000 $1,100 more per week than it does with no recycling.
Therefore, the kayak rental should be willing to pay up to $1,100 per week for the fish processor to recycle water. However, the recycling method
decreases the fish processor's economic profit by $2,300 $1,700 = $600 per week. Therefore, the fish processor should be willing to use the
recycling method if it is compensated with at least $600 per week.
Total
(Dollars)
Suppose the kayak rental has the property rights to the lake. That is, the kayak rental has the right to a clean (unpolluted) lake. In this case,
the recycling method and will pay the kayak
assuming the two firms can bargain at no cost, the fish processor will
rental
per week.
True
Now, suppose the fish processor 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 fish processor will
the recycling method, and the kayak rental will pay the fish
per week.
processor
The kayak rental will make the most economic profit when
False
43
4,300
4,600
True or False: The fish processor will use the recycling method only if the kayak rental has the property rights.
NOV
24
3
tv
TMZ
A C

Transcribed Image Text:8. The effects of property rights on achieving efficiency
Consider a lake found in the village of Sturbridge, and then answer the questions that follow.
The village has a kayak rental whose visitors use the lake for
recreation. The village also has a fish processor that dumps
industrial waste into the lake. This pollutes the lake and
makes it a less desirable vacation destination. That is, the
fish processor's waste decreases the kayak rental's economic
profit.
Suppose that the fish processor 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 kayak rental would no longer be affected. If the fish processor uses the recycling method, then the fish processor's
economic profit is $1,700 per week, and the kayak rental's economic profit is $2,100 per week. If the fish processor does not use the recycling
method, then the fish processor's economic profit is $2,300 per week, and the kayak rental's economic profit is $1,000 per week. These figures are
summarized in the following table.
Complete the following table by computing the total profit (the fish processor's economic profit and the kayak rental's economic profit combined) with
and without recycling.
NOV
24
tv
MacBook Pro
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