Suppose that the chemical 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 boat tour would no longer be affected. If the chemical lab uses the recycling method, then the chemical lab's economic profit is $1,600 per week, and the boat tour's economic profit is $2,600 per week. If the chemical lab does not use the recycling method then the chemical lab's economic profit is $2,300 per week, and the boat tour's economic profit is $1,400 per week. These figures are summarize the following table. Complete the following table by computing the total profit (the chemical lab's economic profit and the boat tour's economic profit combined) with and without recycling. Action Chemical Lab (Dollars) Profit Boat Tour Total (Dollars) (Dollars) No Recycling Recycling 2,300 1,400 1,600 2,600 Total economic profit is highest when the recycling production method is When the chemical lab uses the recycling method, the boat tour earns $2,600 - $1,400 = $1,200 more per week than it does with no recycling. Therefore, the boat tour should be willing to pay up to $1,200 per week for the chemical lab to recycle water. However, the recycling method decreases the chemical lab's economic profit by $2,300 $1,600 $700 per week. Therefore, the chemical lab should be willing to use the recycling method if it is compensated with at least $700 per week. Suppose the boat tour has the property rights to the lake. That is, the boat tour has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical lab will the recycling method and will pay the boat tour per week. Now, suppose the chemical 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 chemical lab will the recycling method, and the boat tour will pay the chemical lab week. ▼ per The boat tour 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
Suppose that the chemical 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 boat tour would no longer be affected. If the chemical lab uses the recycling method, then the chemical lab's economic profit is $1,600 per week, and the boat tour's economic profit is $2,600 per week. If the chemical lab does not use the recycling method then the chemical lab's economic profit is $2,300 per week, and the boat tour's economic profit is $1,400 per week. These figures are summarize the following table. Complete the following table by computing the total profit (the chemical lab's economic profit and the boat tour's economic profit combined) with and without recycling. Action Chemical Lab (Dollars) Profit Boat Tour Total (Dollars) (Dollars) No Recycling Recycling 2,300 1,400 1,600 2,600 Total economic profit is highest when the recycling production method is When the chemical lab uses the recycling method, the boat tour earns $2,600 - $1,400 = $1,200 more per week than it does with no recycling. Therefore, the boat tour should be willing to pay up to $1,200 per week for the chemical lab to recycle water. However, the recycling method decreases the chemical lab's economic profit by $2,300 $1,600 $700 per week. Therefore, the chemical lab should be willing to use the recycling method if it is compensated with at least $700 per week. Suppose the boat tour has the property rights to the lake. That is, the boat tour has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical lab will the recycling method and will pay the boat tour per week. Now, suppose the chemical 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 chemical lab will the recycling method, and the boat tour will pay the chemical lab week. ▼ per The boat tour 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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:Suppose that the chemical 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 boat tour would no longer be affected. If the chemical lab uses the recycling method, then the chemical lab's
economic profit is $1,600 per week, and the boat tour's economic profit is $2,600 per week. If the chemical lab does not use the recycling method
then the chemical lab's economic profit is $2,300 per week, and the boat tour's economic profit is $1,400 per week. These figures are summarize
the following table.
Complete the following table by computing the total profit (the chemical lab's economic profit and the boat tour's economic profit combined) with and
without recycling.
Action
Chemical Lab
(Dollars)
Profit
Boat Tour
Total
(Dollars)
(Dollars)
No Recycling
Recycling
2,300
1,400
1,600
2,600
Total economic profit is highest when the recycling production method is
When the chemical lab uses the recycling method, the boat tour earns $2,600 - $1,400 = $1,200 more per week than it does with no recycling.
Therefore, the boat tour should be willing to pay up to $1,200 per week for the chemical lab to recycle water. However, the recycling method
decreases the chemical lab's economic profit by $2,300 $1,600 $700 per week. Therefore, the chemical lab should be willing to use the recycling
method if it is compensated with at least $700 per week.
Suppose the boat tour has the property rights to the lake. That is, the boat tour has the right to a clean (unpolluted) lake. In this case, assuming the
two firms can bargain at no cost, the chemical lab will
the recycling method and will pay the boat tour
per week.
Now, suppose the chemical 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 chemical lab will
the recycling method, and the boat tour will pay the chemical lab
week.
▼ per
The boat tour 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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