Consider a lake found in the village of Sturbridge, and then answer the questions that follow. The village has a kayak rental whose visitors use the lake for recreation. The village also has a chemical lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical lab's waste decreases the kayak rental's economic profit. Suppose that the chemical lab 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 kayak rental would no longer be affected. 1f the chemical lab uses the recycling method, then the chemical lab's economic profit is $2,100 per week, and the kayak rental's economic prot is $1,900 per week. If the chemical lab does not use the recycling method, then the chemical lab's economic profit is $2,400 per week, and the kayak rental's economic prot is $1,100 per week. These gures are summarized in the following table. Complete the following table by computing the total profit (the chemical lab's economic prot and the kayak rental's economic prot combined) with and without recycling. Profit Chemical Lab Kayak Rental Total Action (Dollars) (Dollars) (Dollars) No Recycling 2,400 1,100 Recycling 2,100 1,900 Total economic profit is highest when the recycling production method is V . When the chemical lab uses the recycling method, the kayak rental earns $1,900 $1,100 = $800 more per week than it does with no recycling. Therefore, the kayak rental should be willing to pay up to $800 per week for the chemical lab to recycle water. However, the recycling method decreases the chemical lab's economic profit by $2,400 $2,100 = $300 per week. Therefore, the chemical lab should be willing to use the recycling method if it is compensated with at least $300 per week. Suppose the kayak rental has the property rights to the lake. That is, the kayak rental has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical lab will V the recycling method and will pay the kayak rental V per week. Now, suppose the chemical lab 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 chemical lab will V the recycling method, and the kayak rental will pay the chemical lab V per week. The chemical lab will make the most economic profit when V . True or False: The lake will remain polluted, regardless of who has the property rights. True False