-The Above Figure Shows the Payoff Matrix for Two Firms

question 88

Multiple Choice

-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 chemical firm owns the lake,and the beach owner must pay $10 to keep the chemical firm at just one ton of pollution,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 two 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 two tons of pollution.

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