Question: Suppose that the tannery could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe
Suppose that the tannery could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the campground would no longer be affected. If the tannery uses the recycling method, then the tannery's economic profit is $2,000 per week, and the campground's economic profit is $2,900 per week. If the tannery does not use the recycling method, then the tannery'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 tannery's economic profit and the campground's economic profit combined) with and without recycling. Profit Tannery Campground Total Action (Dollars) (Dollars) (Dollars) No Recycling 2,700 1,900 Recycling 2,000 2,900 Total economic profit is highest when the recycling production method is not used When the tannery uses the recycling method, the campground earns $2,900 - $1,900 = $1,000 more per week than it does with no recycling. Therefore, the campground should be willing to pay up to $1,000 per week for the tannery to recycle water. However, the recycling method decreases the tannery's economic profit by $2,700 - $2,000 = $700 per week. Therefore, the tannery should be willing to use the recycling method if it is compensated with at least $700 per week
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