I am answered the following three mulitipul choise questions using Prisoners Dilemma Scenario. I get confused looking at the table.
Question:
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 non-reveal of MFN trading status is likely to involve some retaliatory measures by China. The game below reflects the potential economic gains associated with two-outcome game which (a) China may impose trade sanctions against US firms and (b) the United States may not new 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__|No_______|
|____________|Sanctions|Sanctions|
|______________________|_________|
|US_|Doesn't_|US Trade_|US Trade-|
|___|Renew___|=$65_____|$140_____|
|____________|Billion__|Billion__|
|____________|China____|China____|
|____________|Trade____|Trade____|
|____________|= $75____|=$5______|
|____________|Billion__|Billion__|
|________________________________|
|____Renews__|US Trade_|US Trade_|
|____________|=$35_____|=$130____|
|____________|Billion__|Billion__|
|____________|China____|China____|
|____________|Trade____|Trade____|
|____________|= $285___|=$275____|
|____________|Billion__|Billion__|
|______________________|_________|
Pursuing its own interests, China will impose trade sanctions against US firms:
A.only if the United States does not renew MFN status with China
B.only if the United States renews MFN status with China
C.regardless of whether the United States renews MFN status with China
D.None of these answers is correct. In pursuing its own best interests, China will in no case impose trade sanctions against US firms.
I picked C?
Pursuing its own best interests, the United States will renew MFN status with China:
A.only if China does not impose trade sanctions against US firms
B.only if China imposes trade sanctions against US firms
C.regardless of whether the United States renews MFN status with China
D.None of these answers is correct. In pursuing its own best interest, the United States will in no case renew MFN status with China
I picked A?
If both countries follow a dominant strategy the value of trade-flow benefits for China will be:
A.$5 billion
B.$75 billion
C.$275 billion
D.$285 billion
I picked D?
Q1: I AGREE
Q2: I would choose D. If the US doesnt renew, it gets $65 if China imposes sanctions and $65 is beter than the $35 the US would get if it renewed and China still imposed sanction.
If the US doesnt renew and China does not impose sanctions, the US gets $140, which is better than the $130 it would get if it renewed and China still did not impose sanctions.
Since China will impose sanctions and the US will not renew, I assert the answer to Q3 is B ($75)
The manufacturer of South Face sells jackets to retail stores for $120 each, and it requires the retail stores to charge customers $150 per jacket. Any retailer that charges less than $150 would violate its contract with South Face. What do economists call this business practice?
To determine the answers to the multiple-choice questions using the Prisoner's Dilemma scenario, you need to analyze the table provided. The table shows the dollar value of trade-flow benefits to the United States and China under different trade-relationship scenarios.
For the first question:
Pursuing its own interests, China will impose trade sanctions against US firms:
A. only if the United States does not renew MFN status with China
B. only if the United States renews MFN status with China
C. regardless of whether the United States renews MFN status with China
D. None of these answers is correct. In pursuing its own best interests, China will in no case impose trade sanctions against US firms.
To find the answer, look at the two scenarios in the table where China imposes trade sanctions. The first scenario is when the United States doesn't renew MFN status, and in that case, the trade value is $65 billion. The second scenario is when the United States renews MFN status, and in that case, the trade value is $35 billion. Since the trade value is different depending on the United States' decision, we can conclude that China's decision to impose trade sanctions is dependent on the United States' action. Therefore, the correct answer is A. only if the United States does not renew MFN status with China.
For the second question:
Pursuing its own best interests, the United States will renew MFN status with China:
A. only if China does not impose trade sanctions against US firms
B. only if China imposes trade sanctions against US firms
C. regardless of whether the United States renews MFN status with China
D. None of these answers is correct. In pursuing its own best interest, the United States will in no case renew MFN status with China.
To determine the answer, look at the two scenarios in the table where the United States renews MFN status with China. In both scenarios, the trade value is higher compared to the scenarios where the United States doesn't renew MFN status. Since the United States wants to pursue its own best interests, it would choose the scenario with higher trade value. Therefore, the correct answer is A. only if China does not impose trade sanctions against US firms.
For the third question:
If both countries follow a dominant strategy, the value of trade-flow benefits for China will be:
A. $5 billion
B. $75 billion
C. $275 billion
D. $285 billion
To determine the answer, we need to find the scenario where both countries have the highest trade value. Looking at the table, we can see that the scenario with the highest trade value for both countries is when the United States renews MFN status with China and China imposes trade sanctions against US firms. In this scenario, the trade value for China is $275 billion. Therefore, the correct answer is C. $275 billion.