a ng.cengage.com 0% MINDTAP Homework (Ch 10) Due Today at 11 PM CDT Back to Assi
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a ng.cengage.com 0% MINDTAP Homework (Ch 10) Due Today at 11 PM CDT Back to Assipment Keep the Highest:/6 The effects of property rights on achieving efficiency Consider a lake found in the village of Sturbridge, and then answer the questions that follow The village has a hiking ledge whose visitors use the lake for recreation. The vilage also has tannery that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the tannery's waste decreases the hicing lodge's ecoome prft. different production od that iveeves reoding water This wald reduce the pout on in the lake to leves Suppose that the tannery could use a afe for recreation, and the hiking lodge wouid no longer be affected. IF the tannery uses the recycling method, then the tannery's economic proft s 1,300 per week, a economic profit is $2,100 per week, and the hiking lodge's economic profit is $1,100 per week. Thase ngures are summarined in the following tasle end the hiking lodge's economic profit is $2,300 per week. Dr the tannery does not use the recycling method, then the tannerys economic preñit and the nking lodge's economic proe combind) wich and Complete the following table by computing the total profe (the tannery's without recycing MacBook Air escExplanation / Answer
Following is the complete table -
Total economic profit is highest when the recycling production method is used.
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 tannery will use the recycling method and will pay the hiking lodge $0 per week.
Now, suppose the tannery 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 tannery will use recycling method, and the hiking lodge will pay the tannery between $800 and $1,200 per week.
The tannery will make the most economic profit when it has the property right to the lake.
As above discussion shows that if suitably compensated, tannery can use the recycling method even if it has the property right to the lake.
Thus, the given statement is True.
Action Tannery Hiking Lodge Total No Recycling 2,100 1,100 3,300 Recycling 1,300 2,300 3,600Related Questions
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