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Recycling 0os't Total economic profit is highest when the recyding production method is When the tannery uses the recyding method, the hiking lodge earns $1,800 - $1,000 = $800 more per week than it does with no recycling. 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 - $1,500 = $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 dean (unpolluted) lake. In this case, assuming the recycling method and will pay the hiking lodge the two firms can bargain at no cost, the tannery will per week. Now, suppose the tannery has the property rights to the lake, induding the right to pollute it. In this case, assuming the two firms can bargain at no the recyding method, and the hiking lodge will pay the tannery per week. cost, the tannery will The tannery will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. O True O False

Recycling 0os't Total economic profit is highest when the recyding production method is When the tannery uses the recyding method, the hiking lodge earns $1,800 - $1,000 = $800 more per week than it does with no recycling. 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 - $1,500 = $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 dean (unpolluted) lake. In this case, assuming the recycling method and will pay the hiking lodge the two firms can bargain at no cost, the tannery will per week. Now, suppose the tannery has the property rights to the lake, induding the right to pollute it. In this case, assuming the two firms can bargain at no the recyding method, and the hiking lodge will pay the tannery per week. cost, the tannery will The tannery will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. O True O False

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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8. 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 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 tannety's waste decreases the hiking lodge's economic profit. Suppose that the taninery could use a different production miethod 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 recyding 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 Hiking Lodge Total Action (Dollars) (Dollars) (Dollars) No Recycling 2,000 1,000 Recycling 1,500 1,800
Transcribed Image Text:8. 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 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 tannety's waste decreases the hiking lodge's economic profit. Suppose that the taninery could use a different production miethod 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 recyding 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 Hiking Lodge Total Action (Dollars) (Dollars) (Dollars) No Recycling 2,000 1,000 Recycling 1,500 1,800
Recycling 0os't Total economic profit is highest when the recyding production method is When the tannery uses the recyding method, the hiking lodge earns $1,800 - $1,000 = $800 more per week than it does with no recycling. Therefore, the hiking lodge should Ble 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 - $1,500 = $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 dean (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, induding the right to pollute it. In this case, assuming the two firms can bargain at no the recyding method, and the hiking lodge will pay the tannery cost, the tannery will per week. The tannery will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. O True O False
Transcribed Image Text:Recycling 0os't Total economic profit is highest when the recyding production method is When the tannery uses the recyding method, the hiking lodge earns $1,800 - $1,000 = $800 more per week than it does with no recycling. Therefore, the hiking lodge should Ble 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 - $1,500 = $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 dean (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, induding the right to pollute it. In this case, assuming the two firms can bargain at no the recyding method, and the hiking lodge will pay the tannery cost, the tannery will per week. The tannery will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. O True O False
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