Lakeview Spa and Shoreline Industries are both situated along the banks of Lake Dreary. Unfortunately for the owners of the Lakeview Spa, Shoreline Industries regularly dumps garbage into the lake, polluting the lake and negatively impacting Lakeview Spa's profits. The following table shows the firms' weekly profits when Shoreline Industries does and does not dump garbage into the lake. Does not dump garbage Dumps garbage Shoreline Industries $1,000/week $1,100/week Lakeview Spa $600/week $400/week a. If Shoreline Industries has the legal right to dump garbage into the lake, and Shoreline Industries and Lakeview Spa can negotiate with one another at no cost, then will Shoreline Industries dump garbage into the lake? multiple choice 1 Shoreline Industries will not dump garbage into the lake. Shoreline Industries will dump garbage into the lake. Is this outcome socially efficient? multiple choice 2 No. Yes. b. If Shoreline Industries has the legal right to dump garbage into the lake, and it costs Lakeview Spa $120 per week to negotiate with Shoreline Industries, then will Shoreline Industries dump garbage into the lake? multiple choice 3 Shoreline Industries will not dump garbage into the lake. Shoreline Industries will dump garbage into the lake. Is this outcome socially efficient? multiple choice 4 Yes. No.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Lakeview Spa and Shoreline Industries are both situated along the banks of Lake Dreary. Unfortunately for the owners of the Lakeview Spa, Shoreline Industries regularly dumps garbage into the lake, polluting the lake and negatively impacting Lakeview Spa's profits. The following table shows the firms' weekly profits when Shoreline Industries does and does not dump garbage into the lake.

	Does not dump garbage	Dumps garbage
Shoreline Industries	$1,000/week	$1,100/week
Lakeview Spa	$600/week	$400/week

a. If Shoreline Industries has the legal right to dump garbage into the lake, and Shoreline Industries and Lakeview Spa can negotiate with one another at no cost, then will Shoreline Industries dump garbage into the lake?

multiple choice 1

Shoreline Industries will not dump garbage into the lake.
Shoreline Industries will dump garbage into the lake.

Is this outcome socially efficient?

multiple choice 2

No.
Yes.

b. If Shoreline Industries has the legal right to dump garbage into the lake, and it costs Lakeview Spa $120 per week to negotiate with Shoreline Industries, then will Shoreline Industries dump garbage into the lake?

multiple choice 3

Shoreline Industries will not dump garbage into the lake.
Shoreline Industries will dump garbage into the lake.

Is this outcome socially efficient?

multiple choice 4

Yes.
No.

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