Question

8. The effects of property rights on achieving efficiency Consider a river found in the city of Philadelphia, and then answer the questions that follow. The city has a campground whose visitors use the river for recreation. The city also has a fish cannery that dumps industrial waste into the river. This pollutes the river and makes it a less desirable vacation destination. That is, the fish cannery's waste decreases the campground's economic profit. Suppose that the fish cannery 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 campground would no longer be affected. If the fish cannery uses the recycling method, then the fish cannery's economic profit is $2,000 per week, and the campground's economic profit is $2,900 per week. If the fish cannery does not use the recycling method, then the fish cannery's economic profit is $2,700 per week, and the campground's economic profit is $1,900 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the fish cannery's economic profit and the campground's economic profit combined) with and without recycling Profit Campground (Dollars) 1.900 Fish Cannery (Dollars) 2.700 Total (Dollars) Action No Recycling
fill in the blanks)

1) "production method is 'not used/used"

2) "the fish cannery will 'not use/use"

3) "pay the campground '0$/between 0-300$/between 300-700$/between 700-1000$"

4) "no cost, the fish cannery will 'not use/use"

5) "the most economic profit when ' the fish cannery has property rights to pollute the river/ it has property rights to a clean river."

Answer 1

No Recycling = 2700+1900 = 4600

Recycling = 2000+2900 = 4900

Blanks-

1) used

2) use

3) $0

4) use

5) between $700 and $1000

6) it has property rights to a pollute or clean the river

The statement is False