The in-state admission rate is so high precisely because it is mainly the best qualified in-state students who apply. The kind of self-selection romani describes has been going on in Michigan for decades, reinforced by HS GCs. It may not be universally true at all high schools in the state, but it is very widespread. Granted, my experience was many decades ago, but only I was one of only 2 students from my graduating class from my smallish UP high school (there were about 120 in my class, if I recall) who applied to Michigan. I was the valedictorian, the other was the salutatorian, and we were both admitted. Our GC encouraged both of us to apply; to my knowledge he didn’t encourage anyone else, though he steered plenty of kids the next rank down academically to apply to Michigan State and Michigan Tech, and the next rank down after that he steered toward Northern Michigan or a local (private) junior college. I don’t get back to my old hometown often, but I was back a few years ago to be the graduation speaker. One member of the (now much smaller) graduating class was headed to the University of Michigan. He was the valedictorian. To my knowledge, no one else even applied.
You certainly can’t assume that with a 50% in-state admission rate, a B+ in-state student has a 50-50 chance of admission. That student’s chances of admission may be close to zero. because they’ll be competing against most of the best students in the state. There aren’t a lot of high-end private college options in Michigan, very few Michiganders leave the state for college, and the University of Michigan is far and away the best in-state public option. So most of the state’s best students apply there, and a healthy fraction of them are accepted. That doesn’t mean it’s rational for weaker students to apply.