Table 17-12 Each Year the United States Considers Renewal of Most Favored

Table 17-12
Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation) . Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland.

-Refer to Table 17-12.Assume that trade negotiators meet to discuss trade policy between the United States and Farland.If neither party to the negotiation is able to trust the other party,then

A) each should assume that the other will choose a strategy that optimizes total value of the trade relationship.
B) the Nash equilibrium will provide the largest possible gains to each party.
C) Farland negotiators should assume that United States negotiators will implement a policy that is in the mutual best interest of both countries.
D) each should follow its dominant strategy.