8. The effects of property rights on achieving efficiency Consider a river found

Question

8. The effects of property rights on achieving efficiency Consider a river found in the city of Philadelphia, and then answer the questions that follorw The city has a campground whose visitors use the river for recreation. The city also has a fish cannery that dumps industrial waste into the river. This pollutes the river and makes it a less desirable vacation destination. That is, the fish cannery's waste decreases the campground's economic profit. Suppose that the fish cannery could use a different production method that involves recyding water This would reduce the p to levels safe for recreation, and the campground would no longer be affected. If the fish cannery uses the recycling method, cannery's economic profit is $1,400 per week, and the campground's economic profit is $2,700 per week. If the fish recydling method, then the fish cannery's economic profit is $2.200 per week, and the campopround's economic profit is $1,500 per week. T figures are summarized in the following table. 0 Type here to search

Explanation / Answer

Total economic profit is highest when recycling is used.

If the camproground has property right to have clean water then the fish cannery will use the recycling method and will pay to campground Zero per month.

If the right is of Fish ACnnery to pollute the water then the fish cannery will use the recycling method and the Camproground will pay the fish cannery at least 800 per week.

The fish cannery will make most economic profit when it has property right.

True the fish cannery will use recycling regardless of who has possession of right.

Profit Action Fish Cannery Campground Total No Recycling 2200 1500 3700 Recycling 1400 2700 4100

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