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isitors use the lake for recreation. The own also has a tannery that dumps dustrial waste into the lake. This ollutes the lake and makes it a less esirable vacation destination. That is, he tannery's waste decreases the hiking dge's economic profit. ose that the tannery could use a different production method that involves recycling water. would reduce the pollution in the lake to levels safe for recreation, and the hiking lodge wou nger be affected. If the tannery uses the recycling method, then the tannery's economic pro 500 per week, and the hiking lodge's economic profit is $1,800 per week. If the tannery do se the recycling method, then the tannery's economic profit is $2,000 per week, and the g lodge's economic profit is $1,000 per week. These figures are summarized in the following Vete the following table by computing the total profit (the tannery's economic profit and the g lodge's economic profit combined) with and without recycling. Profit Tannery Hiking Lodge (Dollars) 1,000 Total ction Rеcycling cycling (Dollars) 2,000 (Dollars) 1,500 1,800 economic profit is highest when the recycling production method is the tannery uses the recycling method. the hiking Jodge earns $1.800 - S1.000 = $8s00 more p

isitors use the lake for recreation. The own also has a tannery that dumps dustrial waste into the lake. This ollutes the lake and makes it a less esirable vacation destination. That is, he tannery's waste decreases the hiking dge's economic profit. ose that the tannery could use a different production method that involves recycling water. would reduce the pollution in the lake to levels safe for recreation, and the hiking lodge wou nger be affected. If the tannery uses the recycling method, then the tannery's economic pro 500 per week, and the hiking lodge's economic profit is $1,800 per week. If the tannery do se the recycling method, then the tannery's economic profit is $2,000 per week, and the g lodge's economic profit is $1,000 per week. These figures are summarized in the following Vete the following table by computing the total profit (the tannery's economic profit and the g lodge's economic profit combined) with and without recycling. Profit Tannery Hiking Lodge (Dollars) 1,000 Total ction Rеcycling cycling (Dollars) 2,000 (Dollars) 1,500 1,800 economic profit is highest when the recycling production method is the tannery uses the recycling method. the hiking Jodge earns $1.800 - S1.000 = $8s00 more p

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter11: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 13CQ
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Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a hiking lodge whose visitors use the lake for recreation. The town also has a tannery that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the tannery's waste decreases the hiking lodge's economic profit. Suppose that the tannery 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 hiking lodge would no longer be affected. If the tannery uses the recycling method, then the tannery's economic profit is $1,500 per week, and the hiking lodge's economic profit is $1,800 per week. If the tannery does not use the recycling method, then the tannery's economic profit is $2,000 per week, and the hiking lodge'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 tannery's economic profit and the hiking lodge's economic profit combined) with and without recycling. Profit Tannery (Dollars) 2,000 Hiking Lodge (Dollars) 1,000 Total Action No Recycling (Dollars) Recycling 1,500 1,800 Total economic profit is highest when the recycling production method is When the tannery uses the recycling method, the hiking lodge earns $1,800 – S1,000 = $800 more per week than it does with no recyding. Therefore, the hiking lodge should be willing to pay up to $800 per week for the tannery to recycle water. However, the recycling method decreases the tannery's economic profit by $2,000 – S1,500 = $500 per week. Therefore, the tannery should be willing to use the recycling method if it is compensated with at least $500 per week.
Transcribed Image Text:Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a hiking lodge whose visitors use the lake for recreation. The town also has a tannery that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the tannery's waste decreases the hiking lodge's economic profit. Suppose that the tannery 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 hiking lodge would no longer be affected. If the tannery uses the recycling method, then the tannery's economic profit is $1,500 per week, and the hiking lodge's economic profit is $1,800 per week. If the tannery does not use the recycling method, then the tannery's economic profit is $2,000 per week, and the hiking lodge'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 tannery's economic profit and the hiking lodge's economic profit combined) with and without recycling. Profit Tannery (Dollars) 2,000 Hiking Lodge (Dollars) 1,000 Total Action No Recycling (Dollars) Recycling 1,500 1,800 Total economic profit is highest when the recycling production method is When the tannery uses the recycling method, the hiking lodge earns $1,800 – S1,000 = $800 more per week than it does with no recyding. Therefore, the hiking lodge should be willing to pay up to $800 per week for the tannery to recycle water. However, the recycling method decreases the tannery's economic profit by $2,000 – S1,500 = $500 per week. Therefore, the tannery should be willing to use the recycling method if it is compensated with at least $500 per week.
Suppose the hiking lodge has the property rights to the lake. That is, the hiking lodge has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the tannery will the recycling method and will pay the hiking lodge per week. Now, suppose the tannery 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 tannery will recycling method, and the hiking lodge will pay the tannery week. the per The tannery will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. True False
Transcribed Image Text:Suppose the hiking lodge has the property rights to the lake. That is, the hiking lodge has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the tannery will the recycling method and will pay the hiking lodge per week. Now, suppose the tannery 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 tannery will recycling method, and the hiking lodge will pay the tannery week. the per The tannery 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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