Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a water park whose visitors use the lake for recreation. The town also has a ketchup factory that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the ketchup factory's waste decreases the water park's economic profit. Suppose that the ketchup factory 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 ketchup factory uses the recycling method, then the ketchup factory's economic profit is $900 per week, and the water park's economic profit is $2,600 per week. If the ketchup factory does not use the recycling method, then the ketchup factory's economic profit is $1,600 per week, and the water park's economic profit is $1,500 per week. These figures are summarized in the following table.
Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a water park whose visitors use the lake for recreation. The town also has a ketchup factory that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the ketchup factory's waste decreases the water park's economic profit. Suppose that the ketchup factory 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 ketchup factory uses the recycling method, then the ketchup factory's economic profit is $900 per week, and the water park's economic profit is $2,600 per week. If the ketchup factory does not use the recycling method, then the ketchup factory's economic profit is $1,600 per week, and the water park's economic profit is $1,500 per week. These figures are summarized in the following table.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section10.1: Externalities And Market Inefficiency
Problem 1QQ
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