PRIN OF MICROECONOMICS
2nd Edition
ISBN: 9780393914085
Author: coppock
Publisher: Norton, W. W. & Company, Inc.
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Question
Chapter 13, Problem 8SP
(a)
To determine
Dominant strategy of US.
(b):
To determine
Dominant strategy of China.
(c):
To determine
Nash Equilibrium in the game.
(d):
To determine
Outcomes of the cooperative game.
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Consider trade relations between Canada and Mexico. Assume that the leaders of the two countries believe the payoffs
to alternative trade policies are as follows:
Canada High Tariffs
Low Tariffs
Mexico
High Tariffs
Canada trade value = $65
Mexico trade value = $75
Canada trade value = $35
Mexico trade value = $285
Refer to Table 17-4. When this game reaches a Nash equilibrium, what will the value of trade flow benefits be?
Canada $35 and Mexico $285
Canada $65and Mexico $75
Canada $130 and Mexico $5
Low Tariffs
Canada trade value = $140
Mexico trade value = $5
Canada trade value = $130
Mexico trade value = $275
Canada $140 and Mexico $275
Consider trade relations between the United States and Mexico. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are shown in the following payoff matrix:
United States' Decision
Low Tariffs
High Tariffs
Mexico's Decision
Low Tariffs
$28 billion, $28 billion
$20 billion, $30 billion
High Tariffs
$30 billion, $20 billion
$25 billion, $25 billion
The dominant strategy for the United States is always to choose tariffs. The dominant strategy for Mexico is always to choose tariffs.
True or False: The Nash equilibrium outcome for trade policy is for the United States to have low tariffs and Mexico to have high tariffs.
True
False
In 1993, the U.S. Congress ratified the North American Free Trade Agreement, in which the United States and Mexico agreed to reduce trade barriers simultaneously.
True or False: Given the trade strategy decisions in the table, the United States is better off and…
Assume two countries (US and Germany) are facing the decision of whether to participate in the Paris Agreement or not. The following payoff matrix contains the estimated payoffs for both countries for all possible strategies.
Germany
US
Join
Not join
Join
A: (500, 360)
B: (100, 200)
Not join
C: (450, 300)
D: (450, 350)
What is the Nash equilibrium of this game if it has to be played sequentially and US moves first?
US joins, Germany joins
US joins, Germany does not join
US does not join, Germany joins
US does not join, Germany does not join
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