8. The effects of property rights on achieving efficiency Consider a river found in the city of Pittsburgh, and then answer the questions that follow, The city has a water park whose visitors use the river for recreation. The city also has a fish processor that dumps industrial waste into the river. This pollutes the river and makes it a less desirable vacation destination. That is, the fish processor's waste decreases the water park's economic DE ALE profit. Suppose that the fish processor could use a different production method that involves recycling water. This would reduce the pollution in the river to levels safe for recreation, and the water park would no longer be affected. If the fish proc r uses the recycling method, then the fish processor's economic profit is $1,100 per week, and the water park's economic profit is $2,600 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,800 per week, and the water park'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 fish processor's economic profit and the wa profit combined) with and without recycling Profit Fish Processor Water Park Total Action (Dollars) (Dollars) (Dollars) No Recycling 1,800 1,500 Recycling 1,100 2,600 Total economic profit is highest when the recycling production method is When the fish processor uses the recycling method, the water park earns $2,600 -$1,500 - $1,100 more per week than it does with no recycling. Therefore, the water park should be willing to pay up to $1,100 per week for the fish processor to recycle water. However, the recycling method decreases the fish processor's economic profit by $1,800 - $1,100 = $700 per week. Therefore, the fish processor should be willing to use the recycling method if it is compensated with at least $700 per week. Suppose the water park has the property rights to the river. That is, the water park has the right to a clean (unpolluted) river. In this case, assuming the two firms can bargain at no cost, the fish processor will the recycling method and will pay the water park per week. Now, suppose the fish processor has the property rights to the river, including the right to pollute it. In this case, assuming the two firms can bargain at no cost, the fish processor will the recycling method, and the water park will pay the fish processor per week. The fish processor will make the most economic profit when True or False: The fish processor will use the recycling method only if the water park has the property rights. True False