Action No Recycling Recycling Research Facility (Dollars) 1,800 1,100 Profit Kayak Rental (Dollars) 1,500 2,600 Total economic profit is highest when the recycling production method is When the research facility uses the recycling method, the kayak rental earns $2,600 - $1,500 = $1,100 more per week than it does with no recycling. Therefore, the kayak rental should be willing to pay up to $1,100 per week for the research facility to recycle water. However, the recycling method decreases the research facility's economic profit by $1,800 - $1,100 = $700 per week. Therefore, the research facility should be willing to use the recycling method if it is compensated with at least $700 per week. Total (Dollars) 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 research facility will the recycling method and will pay the kayak rental per week. O True Now, suppose the research facility 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 research facility will the recycling method, and the kayak rental will pay the research facility O False per week. The research facility will make the most economic profit when True or False: The research facility will use the recycling method only if the kayak rental has the property rights.
Action No Recycling Recycling Research Facility (Dollars) 1,800 1,100 Profit Kayak Rental (Dollars) 1,500 2,600 Total economic profit is highest when the recycling production method is When the research facility uses the recycling method, the kayak rental earns $2,600 - $1,500 = $1,100 more per week than it does with no recycling. Therefore, the kayak rental should be willing to pay up to $1,100 per week for the research facility to recycle water. However, the recycling method decreases the research facility's economic profit by $1,800 - $1,100 = $700 per week. Therefore, the research facility should be willing to use the recycling method if it is compensated with at least $700 per week. Total (Dollars) 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 research facility will the recycling method and will pay the kayak rental per week. O True Now, suppose the research facility 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 research facility will the recycling method, and the kayak rental will pay the research facility O False per week. The research facility will make the most economic profit when True or False: The research facility will use the recycling method only if the kayak rental has the property rights.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter16: Government Regulation
Section: Chapter Questions
Problem 10E
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