8. The effects of property rights on achieving efficiency Consider a lake found in the vitlage of Sturbridge, and then answer the questions that follow. The village has a water park whose visiters use the lake for recreation. The village also has a fish processor that dumps. industrial waste into the fake. This pollutes the take and. makes it a less desirable vacation destination. That is, the fish processor's waste decreases the water park's economic profit. Suppose that the fish processor could use a different production method that involves recycling water. This would reduce the nollutien in the lake to levels safe for recreation, and the water park would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic proft is 51,000 per week, and the water park's economic proht is $2,600 per wenk. If the fish processar does not use the recycling method, then the fish processor's economic profic is $1,700 per week, and the water park's economic arefit is $1,500 per week. These figures are summarized in the following table. Complete the following table by computing the total profic (the fish processor's ecopomic profit and the water park's economic profit combined) with and without recycling. and without recycling. Total economic profit is highest when the recycling production method is When the fish processor uses the recycling method, the water park eams $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 $1,700$1,000=$700 per week. Therefore, the fish processor should be wiling 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 lake, That is, the water park has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cont, 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 iake, 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 Trye or False: The fish processor will use the recycling methodonly if the water park has the property rights. True False