If the fish cannery uses the recycling method, then the fish cannery's economic profit is $1,300 per week, and the resort's economic profit is $2,300 per week. If the fish cannery does not use the recycling method, then the fish cannery's economic profit is $2,100 per week, and the resort's economic profit is $1,100 per week. These figures are summarized in the following
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.
Action Fish Cannery Profits Campground Profits Total Profits
No Recycling 2,300 2000.0 (A)
Recycling 1,800 2800.0 (B)
Total economic profit is highest when the recycling production method is (C) .
When the fish cannery uses the recycling method, the campground earns (D) more per week than it does with no recycling. Therefore, the campground should be willing to pay up to $800 per week for the fish cannery to recycle water. However, the recycling method decreases the fish cannery's economic profit by (E) per week. Therefore, the fish cannery should be willing to use the recycling method if it is compensated with at least $500 per week.
Suppose the campground has the property rights to the river. That is, the campground has the right to a clean (unpolluted) river. In this case, assuming the two firms can bargain at no cost, the fish cannery will (F) the recycling method and will pay the campground (G) per week.
Now, suppose the fish cannery has the property rights to the river, including the right to pollute it. In this case, assuming the two firms can bargain at no cost, the fish cannery will (H) the recycling method, and the campground will pay the fish cannery (I) per week.
The fish cannery will make the most economic profit when (J) .