Mexico and the members of OPEC produce crude oil. Realizing that it would be in their best interests to form an agreement on production goals, a meeting is arranged and an informal, verbal agreement is reached. If both Mexico and OPEC abide by the agreement, then OPEC's profit will be $200 million and Mexico's profit will be $100 million. If both Mexico and OPEC cheat on the agreement, then OPEC's profit will be $175 million and Mexico's profit will be $80 million. If only OPEC cheats, then OPEC's profit will be $185 million, and Mexico's profit will be $60 million. If only Mexico cheats, then Mexico's profit will be $110 million, and OPEC's profit will be $150 million. You may find it helpful to fill in the payoff matrix below.
src="https://sciemce.com/media/4/ppg__rrr0818190951__f1q382g1.jpg" alt="" style="vertical-align: 0.0px;" height="203" width="377" />Which of the following statements is correct?
A. Mexico's dominant strategy is to abide by the agreement.
B. Mexico does not have dominant strategy.
C. Mexico's dominant strategy is to cheat on the agreement.
D. Mexico does not have a dominated strategy.
Answer: C
Economics
src="https://sciemce.com/media/4/ppg__rrr0818190951__f1q382g1.jpg" alt="" style="vertical-align: 0.0px;" height="203" width="377" />Which of the following statements is correct?
A. Mexico's dominant strategy is to abide by the agreement.
B. Mexico does not have dominant strategy.
C. Mexico's dominant strategy is to cheat on the agreement.
D. Mexico does not have a dominated strategy.
Answer: C
You might also like to view...
In the above figure, of the quantities listed below, for which is the total deadweight loss the largest?
A) 0 units B) 10 units C) 20 units D) 30 units
Refer to the diagram above, which represents a country's supply and demand for an internationally traded good. If PW is the world price, and a foreign country engages in dumping by selling at P2, total domestic production will ________ to ________
A) increase; Q2 B) decrease; zero C) increase; Q5 D) increase; Q3
During the Great Depression, as real interest rates rose, good credit risks were less likely to seek loans. This process illustrates the phenomenon of ________
A) adverse selection B) moral hazard C) poor monetary policy D) debt deflation
Official figures indicate that the percentage of persons below the poverty level in the U.S. is more today than it was in 1959
a. True b. False Indicate whether the statement is true or false