Complete the following table by computing the total profit (the chemical plant's economic profit and the hiking lodge's economic profit combined) with and without recycling. Profit Chemical Plant Hiking Lodge Total Action (Dollars) (Dollars) (Dollars) No Recycling 2,000 1,000 Recycling 1,500 1,800 Total economic profit is highest when the recycling production method is When the chemical plant uses the recycling 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 chemical plant to recycle water. However, the recycling method decreases the chemical plant's economic profit by $2,000 – $1,500 = $500 per week. Therefore, the chemical plant 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 clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method and will pay the hiking lodge per week. Now, suppose the chemical plant 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 plant will v the recycling method, and the hiking lodge will pay the chemical plant per week. The hiking lodge will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. True False
Complete the following table by computing the total profit (the chemical plant's economic profit and the hiking lodge's economic profit combined) with and without recycling. Profit Chemical Plant Hiking Lodge Total Action (Dollars) (Dollars) (Dollars) No Recycling 2,000 1,000 Recycling 1,500 1,800 Total economic profit is highest when the recycling production method is When the chemical plant uses the recycling 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 chemical plant to recycle water. However, the recycling method decreases the chemical plant's economic profit by $2,000 – $1,500 = $500 per week. Therefore, the chemical plant 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 clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will the recycling method and will pay the hiking lodge per week. Now, suppose the chemical plant 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 plant will v the recycling method, and the hiking lodge will pay the chemical plant per week. The hiking lodge will make the most economic profit when True or False: The lake will remain polluted, regardless of who has the property rights. True False
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information
Section: Chapter Questions
Problem 1WNG
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