This Test: 60 pts p The United States claims that a taril on export water to Cal

Question

This Test: 60 pts p The United States claims that a taril on export water to Califomia to The United States The table shows a payoff matrix for the game that the United States and Canada are playing lumber damage the interests of U.S producers. The United States has imposed mports to counter the subsidy, Canada is thinking of retaliaing by refusing to U.S The best strategy for the United States is to The outcome ofthis game is that O A Canada does not export and the United Stades imposes a tarilf O B. Canada exports and the United States imposes a tani OC. a"trade between the two cortes stops O A impose a tariff only if Canada exports export only if the United States does not impose a tarit O c. impose a tariff only if Canada does not export: export only it the United States imposes a tanif 0 D. rot impose a tariff, not export OE, stop all trade wth Canada; OD. Canada does not export and the Unibed States does not impose a tar Canada 0sports and the Unied States does not mpose a OE. stop all trade with the United States 2

Explanation / Answer

Answer 1:

The dominanat strategy for the United States is to impose a tariff while dominanat strategy for Canada is to export. Thus, option B is correct.

Answer 2:

Option B. The Nash equilibrium of the game is canada exporting and u.S.imposing a tariff.

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