Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs

and benefits.

b.

If we apply marginal analysis, what is the optimal amount of land to be restored?
302 12 • Self-Check Questions

12. Consider the case of global environmental problems that spill across international borders as a prisoner’s

dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries, A

and B. Each country can choose whether to protect the environment, at a cost of 10, or not to protect it, at

a cost of zero. If one country decides to protect the environment, there is a benefit of 16, but the benefit is

divided equally between the two countries. If both countries decide to protect the environment, there is a

benefit of 32, which is divided equally between the two countries.

a.

In Table 12.10, fill in the costs, benefits, and total payoffs to the countries of the following decisions.
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