Consider a town with a river. The town has hiding lodge whose use the river for
ID: 1207850 • Letter: C
Question
Consider a town with a river. The town has hiding lodge whose use the river for recreation. The town also has a chemical plant that creates industrial waste, which it dumps into the river. This pollutes the river and makes it a less desirable vacation destination. That is, the chemical plant's efficient decreases the hiding lodge's profit. Throughout this problem, assume that are suppose that the chemical plant could use an alternative production method involving water recycling. This would reduce the pollution in the river to levels safe for recreation, and the hiding lodge would be longer be affected. If the chemical plant uses the recycling method then the chemical plant's profit is $10,000 per week, and the hiking lodge's profit is $18,000 per week. If the chemical plant does not use the recycling method, then the chemical plant's profit is $16,000 per week, and the lodge's profit is $ 10,000 per week.Explanation / Answer
Use (since profit from using i.e. $28000 is greater than total profit from not using i.e. $26000) Use between $6000 and $8000 Use between $6000 and $8000 Part (a) is correct, as it shows the benefits from bargaining