8. The effects of property rights on achieving efficiency chegg according to the

Question

8. The effects of property rights on achieving efficiency chegg according to the law of reflection, fill out nd then answer the questions that follow. the angles in the chart - Google Search The town has a resort whose visitors use the lake for recreation. The town also has a chemical plant that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical plant's waste decreases the resort's economic profit. Suppose that the chemical plant 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 resort would no longer be affected. If the chemical plant uses the recycling method, then the chemical plant's economic profit is $1,400 per week, and the resort's economic profit is $2,700 per week. If the chemical plant does not use the recycling method, then the chemical plant's economic profit is $2,200 per week, and the resort'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 chemical plant's economic profit and the resort's economic profit combined) with and without recycling Profit Total Dollars Chemical Plant Resort Action No Recycling Recycling Dollars 2,200 1,400 Dollars 1,500 2,700 Total economic profit is highest when the recycling production method is when the chemical plant uses the recycling method, the resort earns $2.700-$1.500=$1,200 more per week than it does with no recycling. Therefore, the resort should be willing to pay up to $1,200 per week for the chemical plant to recycle water. However, the recycling method decreases the chemical plant's economic profit by $2,200 $1,400 $800 per week. Therefore, the chemical plant should be willing to use the recycling method if it is compensated with at least $800 per week

Explanation / Answer

Following is the complete table -

Total economic profit is highest when the recycling production method is used.

Suppose the resort has the property rights to the lake. That is, the resort has the right to a clean (unpolluted) lake. In this case assuming the two firms can bargain at no cost, the chemical plant will use the recycling method and will pay the resort $0 per week.

Now, suppose the chemical plant has the property rights to the lake, including the right to pollute it. In this case, assuming that the two firms can bargain at no cost, the chemical plant will use the recycling method and the resort will pay the chemical plant between $800 and $1,200 per week.

The resort will make the most economic profit when it has the property rights to lake.

If adequately compensated then chemical plant can use the recycling method even if it has the property right to lake and can pollute it.

So, it is not right to say that chemical plant will use the recycling method only if the resort has the property rights.

Thus, the given statement is False.

Action Chemical Plant Resort Total No recycling 2,200 1,500 3,700 Recycling 1,400 2,700 4,100

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