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.This game is ________ because ________.
A. a prisoner's dilemma; not cheating is better for both
B. a prisoner's dilemma; cheating is better for both
C. not a prisoner's dilemma; OPEC does not have a dominant strategy
D. not a prisoner's dilemma; cheating is better for both
Answer: C
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Discretionary monetary policy was more frequently employed than discretionary fiscal policy in the two decades following World War II because
A) economic conditions did not seem to require any use of fiscal policy tools during this period. B) economists did not yet believe in the effectiveness of fiscal policy. C) inflation was not yet seen as a problem. D) monetary policy could be altered without Congressional action. E) monetary policy was thought to be capable of raising output while holding down prices.
In the Keynesian theory, an exogenous decrease in the demand for money shifts
a. the LM curve to the right. b. the LM curve to the left. c. the IS curve to the right. d. the IS curve to the left. e. neither the IS or LM curves.
Suppose that, at the market clearing price of natural gas, the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6. What will result from a price ceiling that is 10 percent below the market clearing price?
A) A shortage equal to 1.8 percent of the market clearing quantity B) A shortage equal to 0.6 percent of the market clearing quantity C) A shortage equal to 18 percent of the market clearing quantity D) A shortage equal to 6 percent of the market clearing quantity E) More information is needed.
Which one of the following would create a demand for a foreign currency and supply of dollars in the foreign exchange market?
a. the sale of U.S. automobiles to a Mexican consumer b. the spending by British tourists in the United States c. the purchase of 1,000 shares of IBM stock by a Latin American investor d. the purchase of Japanese televisions by an American distributor