Bitburg and Pottersville are neighboring towns. Both towns have factories that emit air pollution, which imposes costs on both towns due to impaired health. These towns can implement pollution controls. The payoff matrix below represents each town’s options: PottersvilleReduce PollutionDon’t Reduce PollutionBitburgReduce PollutionCost to Bitburg: $1000Cost to Pottersville: $1000Cost to Bitburg: $2000Cost to Pottersville: $0Don’t Reduce PollutionCost to Bitburg: $0Cost to Pottersville: $2000Cost to Bitburg: $1500Cost to Pottersville: $1500 What is the best collective outcome?What is the worst collective outcome?Explain which outcome is more likely and why.

Reduce or stop the release of pollutants into the environment by practising pollution control.…

Answered: Bitburg and Pottersville are…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Bitburg and Pottersville are neighboring towns. Both towns have factories that emit air pollution, which imposes costs on both towns due to impaired health. These towns can implement pollution controls. The payoff matrix below represents each town’s options:

	Pottersville
Reduce Pollution	Don’t Reduce Pollution
Bitburg	Reduce Pollution	Cost to Bitburg: $1000 Cost to Pottersville: $1000	Cost to Bitburg: $2000 Cost to Pottersville: $0
Don’t Reduce Pollution	Cost to Bitburg: $0 Cost to Pottersville: $2000	Cost to Bitburg: $1500 Cost to Pottersville: $1500

What is the best collective outcome?
What is the worst collective outcome?
Explain which outcome is more likely and why.

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