5. The effects of property rights on achieving efficiency The village has a camp

Question

5. The effects of property rights on achieving efficiency The village has a campground whose visitors use the lake for recreation. The village also has a research lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the research lab's waste decreases the campground's economic profit. Suppose that levels saio fo recreation, and the campground would no longer be affected. If the research lab uses the recycling method, then the research lab's economic prit is $2,200 per week, and the campground's economic profit is $3,200 per week. If the research lab does not use the recycling method then the research lab's economic profit is $3,000 per week, and the campground's economic profit is $2,000 per week. These figures are summarized in the following table. t the research lab could use a different production method that involves recycling water. This would reduce the pollution in the lake to Comp & the following table by computing the total profit (the research lab's economic profit and the campground's economic profit combined) with and without recycling Profit Campground (Dollars) Total imeu (Dollars) Action

Explanation / Answer

1) Total Profit from No Recycling = 3000 + 2000 = $ 5000

2) Total profit from Recycling = 2200 + 3200 = $ 5400

3) Used

4) Not use; between $ 400 and $ 800

5) Not use; between $ 800 and $ 1200

6) It has the property right to clean a lake

7) False

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