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Figure: Payoff Matrix for the United States and the European Union
-(Figure: Payoff Matrix for the United States and the European Union) Look at the figure Payoff Matrix for the United States and the European Union. Suppose that the United States and the European Union both produce corn, and each region can make more profit if output is limited and the price of corn is high. The Nash equilibrium combination is for the United States to produce a _____ output and the European Union to produce a _____ output.
A) high; high
B) high; low
C) low; low
D) low; high

Question

Use the following to answer questions:
Figure: Payoff Matrix for the United States and the European Union 
-(Figure: Payoff Matrix for the United States and the European Union) Look at the figure Payoff Matrix for the United States and the European Union. Suppose that the United States and the European Union both produce corn, and each region can make more profit if output is limited and the price of corn is high. The Nash equilibrium combination is for the United States to produce a _____ output and the European Union to produce a _____ output.
A) high; high 
B) high; low 
C) low; low 
D) low; high

Quizplus · Accepted Answer

In a Nash equilibrium, both players choose their best response given the other player's choice. If both produce a high output, neither can unilaterally increase profit by changing their output level.

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