Question: Both Wisconsin and Michigan border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin

Both Wisconsin and Michigan 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 Michigan will receive the other 400. If Michigan cleans the lake, it will cost them 700 and generate social benefits of 900 – however, Michigan will receive only 600 of those benefits while 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

Question 9 options:

A) Wisconsin gains 200, Michigan gains 100

B) Wisconsin gains 300, Michigan loses 100

C) Wisconsin gains 300, Michigan gains 100

D) Wisconsin gains 200, Michigan loses 100

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