Table 16-9
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 renewal of MFN trading status is likely to involve some retaliatory measures by China. The payoff table below shows the potential economic gains associated with a game in which China may impose trade sanctions against U.S. firms and the United States may not renew MFN status with China. The table contains the dollar value of all trade-flow benefits to the United States and China.

-Refer to Table 16-9.When this game reaches a Nash equilibrium,the value of trade flow benefits will be

Question

Table 16-9
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 renewal of MFN trading status is likely to involve some retaliatory measures by China. The payoff table below shows the potential economic gains associated with a game in which China may impose trade sanctions against U.S. firms and the United States may not renew MFN status with China. The table contains the dollar value of all trade-flow benefits to the United States and China.
 
-Refer to Table 16-9.When this game reaches a Nash equilibrium,the value of trade flow benefits will be

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. The values $65 b for the United States and $75 b for China likely represent such a balance where neither country can benefit by unilaterally changing their strategy.

Table 16-9 Each Year the United States Considers Renewal of Most Favored