Question on the effects of property rights on achieving efficiency

when the tannery uses the recycling method, the resort earns $2,600 31,400 = 31,200 more per week than it does with no recycling. Therefore, the resort should be willing to pay up to $1,200 per week for the tannery to recycle water. However, the recycling method decreases the tannery's economic prot by $2,900 32,2130 = S'HJD per week. Therefore, the tannery should be willing to use the recycling method if it is compensated with at least WOO per week. Suppose the resort has the property rights to the river. That is, the resort has the right to a clean (unpolluted) riyer. In this case, assuming the two rms can bargain at no cost, the tannery will V the recycling method and will pay the resort V per week. Now, suppose the tannery has the property rights to the river, including the right to pollute it. In this case. aesuming the two rms can bargain at no cost, the tannery will V the recycling method, and the resort will pay the tannery V per week. The resort will make the most economic prot when V . True or False: The tannery will use the recycling method, regardless of who has the property rights. 0 True 0 False m Saves. Continue The city has a resort whose visitors use the river for recreation. The city also has a tannery that dumps industrial waste into the river. This pollutes the river and makes it a less desirable vacation destination. That is, the tannery's waste decreases the resort's economic prot. Suppose that the tannerw,r 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 resort would no longer be affected. If the tannery uses the recycling method, then the tannery's economic prot is $2,200 per week, and the resort's economic prot is $2,600 per week. If the tannery does not use the recycling method, then the tannery's economic prot is $2,900 per week, and the resort's economic prot is $1,400 per week. These gures are summarized in the following table. Comoiete the fotiowing table by computing the totai prot (the tannery's economic profit and the resort's economic profit combined) with and without recyciing. Prot Ta nneryr Resort Total Action (Boilers) (Dollars) (Batters) No Recycling 2,900 1.400 E Recycling 2,200 2,500 E Total economic prot is highest when the recycling production method is v