-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the beach owner also owns the lake,and the chemical firm must pay $10 per ton to pollute,then
A) the beach shuts down and the chemical firm produces 1 ton of pollution.
B) the beach shuts down and the chemical firm produces 2 tons of pollution.
C) the beach operates and the chemical firm produces 1 ton of pollution.
D) the beach operates and the chemical firm produces 2 tons of pollution.

Question

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the beach owner also owns the lake,and the chemical firm must pay $10 per ton to pollute,then
A) the beach shuts down and the chemical firm produces 1 ton of pollution. 
B) the beach shuts down and the chemical firm produces 2 tons of pollution. 
C) the beach operates and the chemical firm produces 1 ton of pollution. 
D) the beach operates and the chemical firm produces 2 tons of pollution.

Quizplus · Accepted Answer

Since the beach owner also owns the lake, they would likely find a balance between allowing some pollution for economic gain from the chemical firm and keeping the beach attractive for visitors. Charging $10 per ton of pollution, the beach owner would prefer the chemical firm to produce at a level that minimizes pollution while still operating, which is 1 ton, to maintain the beach's attractiveness.

-The Above Figure Shows the Payoff Matrix for Two Firms