Exhibit 15-3 Prior to the year 2000,the United States considered renewal of Most Favored Nation (MFN)trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations).Historically,legislators made threats of not renewing MFN status because of alleged human rights abuses in China.The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China.The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U.S.firms and the United States chooses whether to renew MFN status with China.
Refer to Exhibit 15-3.If both countries follow a dominant strategy,the gains from trade for the United Sates will be:

Question

Exhibit 15-3 Prior to the year 2000,the United States considered renewal of Most Favored Nation (MFN)trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations).Historically,legislators made threats of not renewing MFN status because of alleged human rights abuses in China.The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China.The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U.S.firms and the United States chooses whether to renew MFN status with China.
 Refer to Exhibit 15-3.If both countries follow a dominant strategy,the gains from trade for the United Sates will be:

Quizplus · Accepted Answer

In this game, both countries have a dominant strategy of choosing to cooperate and trade. If China imposes trade sanctions, the US loses $70, and if the US does not renew MFN status, they lose $100. Therefore, the best outcome for both countries is for them to cooperate and trade, resulting in a gain of $65 for the US (10 for China, 55 for the US).

Exhibit 15-3 Prior to the Year 2000,the United States Considered