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sider 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 research lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the research lab's waste decreases the hiking lodge's economic profit. pose that the research lab could use a different production method that involves recycling water. This would reduce the pollution in the evels safe for recreation, and the hiking lodge would no longer be affected. If the research lab uses the recycling method, then the res s economic profit is $1,400 per week, and the hiking lodge's economic profit is $2,700 per week. If the research lab does not use the cling method, then the research lab's economic profit is $2,200 per week, and the hiking lodge's economic profit is $1,500 per week. T res are summarized in the following table.

sider 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 research lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the research lab's waste decreases the hiking lodge's economic profit. pose that the research lab could use a different production method that involves recycling water. This would reduce the pollution in the evels safe for recreation, and the hiking lodge would no longer be affected. If the research lab uses the recycling method, then the res s economic profit is $1,400 per week, and the hiking lodge's economic profit is $2,700 per week. If the research lab does not use the cling method, then the research lab's economic profit is $2,200 per week, and the hiking lodge's economic profit is $1,500 per week. T res are summarized in the following table.

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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5. 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 research lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the research lab's waste decreases the hiking lodge's economic profit. ww Suppose that the research lab 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 research lab uses the recycling method, then the research lab's economic profit is $1,400 per week, and the hiking lodge's economic profit is $2,700 per week. If the research lab does not use the recycling method, then the research lab's economic profit is $2,200 per week, and the hiking lodge's economic profit is $1,500 per week. These figures are summarized in the following table.
Transcribed Image Text:5. 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 research lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the research lab's waste decreases the hiking lodge's economic profit. ww Suppose that the research lab 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 research lab uses the recycling method, then the research lab's economic profit is $1,400 per week, and the hiking lodge's economic profit is $2,700 per week. If the research lab does not use the recycling method, then the research lab's economic profit is $2,200 per week, and the hiking lodge's economic profit is $1,500 per week. These figures are summarized in the following table.
Complete the following table by computing the total profit (the research lab's economic profit and the hiking lodge's economic profit combined) with and without recycling. Action No Recycling Recycling Research Lab (Dollars) 2,200 1,400 Profit Hiking Lodge (Dollars) 1,500 2,700 Total (Dollars) Total economic profit is highest when the recycling production method is Ⓒ True used or not used When the research lab uses the recycling method, the hiking lodge earns $2,700 - $1,500 $1,200 more per week than it does with no recycling. Therefore, the hiking lodge should be willing to pay up to $1,200 per week for the research lab to recycle water. However, the recycling method decreases the research lab's economic profit by $2,200 - $1,400 = $800 per week. Therefore, the research lab should be willing to use the recycling method if it is compensated with at least $800 per week. False 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 research lab will the recycling method and will pay the hiking lodge ▼per week. used or not used se top right corner The research lab will make the most economic profit when $0 Between $ and $400 Between $400 and $800 Between $800 and $1,200 see top right corner Now, suppose the research lab 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 research lab will the recycling method, and the hiking lodge will pay the research used or not used lab per week. True or False: The research lab will use the recycling method, regardless of who has the property rights. it has rights to pollute lake or the hiking lodge has rights to clean lake
Transcribed Image Text:Complete the following table by computing the total profit (the research lab's economic profit and the hiking lodge's economic profit combined) with and without recycling. Action No Recycling Recycling Research Lab (Dollars) 2,200 1,400 Profit Hiking Lodge (Dollars) 1,500 2,700 Total (Dollars) Total economic profit is highest when the recycling production method is Ⓒ True used or not used When the research lab uses the recycling method, the hiking lodge earns $2,700 - $1,500 $1,200 more per week than it does with no recycling. Therefore, the hiking lodge should be willing to pay up to $1,200 per week for the research lab to recycle water. However, the recycling method decreases the research lab's economic profit by $2,200 - $1,400 = $800 per week. Therefore, the research lab should be willing to use the recycling method if it is compensated with at least $800 per week. False 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 research lab will the recycling method and will pay the hiking lodge ▼per week. used or not used se top right corner The research lab will make the most economic profit when $0 Between $ and $400 Between $400 and $800 Between $800 and $1,200 see top right corner Now, suppose the research lab 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 research lab will the recycling method, and the hiking lodge will pay the research used or not used lab per week. True or False: The research lab will use the recycling method, regardless of who has the property rights. it has rights to pollute lake or the hiking lodge has rights to clean lake
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