Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost
1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. If Wisconsin does not clean the lake and Michigan does then the payoffs will be
A) Wisconsin gains 200, Illinois gains 100
B) Wisconsin gains 200, Illinois loses 100
C) Wisconsin gains 300, Illinois loses 100
D) Wisconsin gains 300, Illinois gains 100
Correct Answer:
Verified
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