Each year, the United States considers renewal of Most Favored nation (MFN) trading status with China. Historically, legislators have made threats of not renewing MFN status because of human rights abuses in China. The game below reflects the potential economic gains associated with a two-outcomes in which (a) China may impose trade sanctions against US firms and (b) the United States may not renew MFN status with China. The following table contains the dollar value of all trade-flow benefits to the United States and China under two trade-relationship scenarios.

,----------------------China
,-------------|Imposes------|Doesn't
,-------------|Trade--------|Impose
,-------------|Sanctions----|Trade
,-------------|Against US---|Sanctions
,---------------------------|---------
,------US-------------------|---------
Doesn't Renew-|US trade----|US trade---MFN with China|$65 billion-|$140billion
,-------------|China Trade-|China Trade
,-------------|$75 billion-|$5 billion
,--------------------------|----------|
Renews MFN----|US trade----|US trade--|
With China----|$35 billion-|$130billion
,-------------|Chian Trade-|China trade
,-------------|$285 billion|$275billion

If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e., enter into an agreement about the policy they should adopt), then we would expect the game outcome to be:

A. US 35 billion and China $285 billion
B. US $65 billion and China $75 billion
C. US 140 billion and China $5 billion
D. US $130 billion and China $275 billion

I picked D?

I agree.

To determine the answer to the question, let's analyze the table provided. It represents the potential economic gains under two trade relationship scenarios: (1) if China imposes trade sanctions against US firms, and (2) if the United States does not renew Most Favored Nation (MFN) status with China.

In the first scenario, if China imposes trade sanctions against US firms and the United States does not renew MFN with China, the table shows that US trade with China would be valued at $65 billion (row: Doesn't Renew MFN, column: Imposes Trade Sanctions Against US). Similarly, China trade with the US would be valued at $140 billion (row: Doesn't Renew MFN, column: Doesn't Impose Trade Sanctions).

In the second scenario, if the United States renews MFN with China, and there are no trade sanctions imposed by China, the table shows that US trade with China would be valued at $35 billion (row: Renews MFN with China, column: US Trade). China trade with the US would be valued at $130 billion (row: Renews MFN with China, column: China Trade).

Now, let's consider the question: "If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e., enter into an agreement about the policy they should adopt), then we would expect the game outcome to be..."

Based on the information provided, the most favorable outcome for the United States is when it renews MFN with China and there are no trade sanctions imposed. In this scenario, US trade would be valued at $35 billion, and China trade would be valued at $130 billion, as shown in the table.

Therefore, the correct answer is D. US $130 billion and China $275 billion.

It is worth noting that this answer assumes that both parties would choose the scenario that maximizes their economic gains, as described in the table. However, in real-world negotiations, there may be other factors beyond economic gains that can influence the outcomes.