According to the information provided, as the production level deviates from the agreed-upon quantity, the total profit earned collectively by the two countries:
A)falls
B)falls, as long as production levels are greater than the Nash equilibrium
C)falls, as long as production levels are equal to the Nash equilibrium
D)falls, as long as production levels are greater than the competitive equilibrium

Question

Quizplus · Accepted Answer

The total profit earned collectively by the two countries falls as the production level deviates from the agreed-upon quantity because the agreed-upon quantity is typically set at an optimal level to maximize collective profits, taking into account the balance between supply and demand. Deviating from this level either by increasing or decreasing production can lead to an imbalance, causing profits to fall due to either oversupply (leading to lower prices) or undersupply (leading to lost sales opportunities).

According to the Information Provided, as the Production Level Deviates