o}: CENGAGE l MlNDTAP Homework (Ch 10) 8. The effects of property rights on achieving efficiency Consider a lake found in the village of Sturbrldge, and then answer the questions that follow. The village has a water park whose visitors use the lake for recreation. The Village also has a ketchup factory that dumps industrial waste into the lake. This pollutes the lake and makes it a less deswable vacation destination. That Is, the ketchup factory's waste decreases the water park's economic prot. Suppose that-the ketchup factory could use a different production method that involves recycling water. This would reduce the pollution m the lake to levels safe for recreation, and the water park would no longer be affected. If the ketchup factory uses the recycling method, then the ketchup factory's economic profit is $1,000 per week, and the water park's economic profit is $2,600 per week. If the ketchup factory does not use the recycling method, then the ketchup factory's economic profit Is $1,700 per week, and the water park's economic profit IS $1,500 per week. These gures are summarized In the followmg table. Gmail You Tube Maps GE News Translate Capstone Project: (... CENGAGE MINDTAP Homework (Ch 10) Complete the following table by computing the total profit (the ketchup factory's economic profit and the water park's economic profit combined) with and without recycling. Profit Ketchup Factory Water Park Total Action (Dollars) ( Dollars) ( Dollars) No Recycling 1,700 1,500 Recycling 1,000 2,600 Total economic profit is highest when the recycling production method is When the ketchup factory 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 ketchup factory to recycle water. However, the recycling method decreases the ketchup factory's economic profit by $1,700 - $1,000 - $700 per week. Therefore, the ketchup factory 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 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 cost, the ketchup factory will_ the recycling method and will pay the water park per week. Now, suppose the ketchup factory 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 ketchup factory will the recycling method, and the water park will pay the ketchup factory per week. The ketchup factory will make the most economic profit when L O M WCENGAGE MINDTAP Homework (Ch 10) Total economic profit is highest when the recycling production method is When the ketchup factory 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 ketchup factory to recycle water. However, the recycling method decreases the ketchup factory's economic profit by $1,700 - $1,000 - $700 per week. Therefore, the ketchup factory 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 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 cost, the ketchup factory will the recycling method and will pay the water park per week. Now, suppose the ketchup factory 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 ketchup factory will the recycling method, and the water park will pay the ketchup factory per week. The ketchup factory will make the most economic profit when True or False: The ketchup factory will use the recycling method, regardless of who has the property rights. O True O False Grade It Now Save & Continue