How the tannery and resorts profits combined

Reference no: EM13239384

Consider a city with a river. The city has a resort whose visitors use the river for recreational purposes. The city also has a tannery that creates industrial waste which it dumps into the river. This pollutes the river, and makes the river a less desirable vacation location. That is, the tannery's effluent decreases the resort's profits.

Suppose that the tannery can use a production method that includes water recycling. This would reduce the pollution in the river to levels that are safe for recreation, and would no longer affect the resort. When using the recycling method, the tannery's profits are $1,500/week, and the resort's profits are $1,700/week. With the recycling method, the tannery's profits are $2,000/week and the resort's profits are $1,000/week.

When are total profits the highest (the tannery and resort's profits combined)?

Reference no: EM13239384

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