Suppose that the fish processor 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 water park would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,100 per week, and the water park's economic profit is $2,600 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,800 per week, and the water park'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 fish processor's economic profit and the water park's economic profit combined) with and without recycling. Profit Fish Processor Action (Dollars) Water Park (Dollars) Total (Dollars) No Recycling Recycling 1,800 1,500 1,100 2,600 Total economic profit is highest when the recycling production method is $1,500 $1,100 more per week than it does with no recycling. When the fish processor uses the recycling method, the water park earns $2,600 Therefore, the water park should be willing to pay up to $1,100 per week for the fish processor to recycle water. However, the recycling method decreases the fish processor's economic profit by $1,800 $1,100 = $700 per week. Therefore, the fish processor should be willing to use the recycling method if it is compensated with at least $700 per week. Suppose the water park has the property rights to the lake. That is, the water park has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the fish processor will the recycling method and will pay the water park per week. Now, suppose the fish processor 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 fish processor will the recycling method, and the water park will pay the fish processor per week. The water park will make the most economic profit when
Suppose that the fish processor 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 water park would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,100 per week, and the water park's economic profit is $2,600 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,800 per week, and the water park'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 fish processor's economic profit and the water park's economic profit combined) with and without recycling. Profit Fish Processor Action (Dollars) Water Park (Dollars) Total (Dollars) No Recycling Recycling 1,800 1,500 1,100 2,600 Total economic profit is highest when the recycling production method is $1,500 $1,100 more per week than it does with no recycling. When the fish processor uses the recycling method, the water park earns $2,600 Therefore, the water park should be willing to pay up to $1,100 per week for the fish processor to recycle water. However, the recycling method decreases the fish processor's economic profit by $1,800 $1,100 = $700 per week. Therefore, the fish processor should be willing to use the recycling method if it is compensated with at least $700 per week. Suppose the water park has the property rights to the lake. That is, the water park has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the fish processor will the recycling method and will pay the water park per week. Now, suppose the fish processor 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 fish processor will the recycling method, and the water park will pay the fish processor per week. The water park will make the most economic profit when
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Suppose that the fish processor 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 water park would no longer be affected. If the fish processor uses the recycling method, then the fish processor's
economic profit is $1,100 per week, and the water park's economic profit is $2,600 per week. If the fish processor does not use the recycling method,
then the fish processor's economic profit is $1,800 per week, and the water park'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 fish processor's economic profit and the water park's economic profit combined) with
and without recycling.
Profit
Fish Processor
Action
(Dollars)
Water Park
(Dollars)
Total
(Dollars)
No Recycling
Recycling
1,800
1,500
1,100
2,600
Total economic profit is highest when the recycling production method is
$1,500
$1,100 more per week than it does with no recycling.
When the fish processor uses the recycling method, the water park earns $2,600
Therefore, the water park should be willing to pay up to $1,100 per week for the fish processor to recycle water. However, the recycling method
decreases the fish processor's economic profit by $1,800 $1,100 = $700 per week. Therefore, the fish processor should be willing to use the
recycling method if it is compensated with at least $700 per week.
Suppose the water park has the property rights to the lake. That is, the water park has the right to a clean (unpolluted) lake. In this case, assuming
the two firms can bargain at no cost, the fish processor will
the recycling method and will pay the water
park
per week.
Now, suppose the fish processor 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 fish processor will
the recycling method, and the water park will pay the fish processor
per week.
The water park will make the most economic profit when
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