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The effects of property rights on achieving efficiency Consider a lake in the town of Center Barnstead, and then answer the questions that follow. Action

The effects of property rights on achieving efficiency

Consider a lake in the town of Center Barnstead, and then answer the questions that follow.

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Action No Recycling Recycling Chemical Plant (Dollars) 2,300 1,500 Profit Hiking Lodge Total (Dollars) (Dollars) 1,600 2,800 Total economic profit is highest when the recycling production method is Suppose the hiking lodge has the property rights to the lake. That is, the hiking lodge has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will W the recycling method and will pay the hiking lodge W per week. m Suppose the hiking lodge has the property rights to the lake. That is, the hiking lodge has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the chemical plant will W the recycling method and will pay the hiking lodge W per week. between $0 and $400 between $400 and $800 between $800 and $1,200 Now, suppose the chemical plant 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 plant will W the recycling method, and the hiking lodge will pay the chemical week. plant not use The chemical plant will make the ymic profit when Now, suppose the chemical plant 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 plant will W the recycling method, and the hiking lodge will pay the chemical plant per week. between $0 and $400 between $400 and $800 between $800 and $1,200 The chemical plant will make the most economic profit when the hiking lodge has property rights to a clean lake it has property rights to pollute the lake True or False: The chemical plant will use the recycling method, regardless of who has the property rights. True False The town has a hiking lodge whose visitors use the lake for recreation. The town also has a chemical plant that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical plant's waste decreases the hiking lodge's economic profit

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