Scenario 17-3

question 119

Multiple Choice

Scenario 17-3. Consider two countries, Muria and Zenya, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country's ranking of the outcome (4 = best outcome, 1 = worst outcome) .

-Refer to Scenario 17-3.Suppose the two countries agreed to disarm existing weapons.In reality these two countries may have a hard time keeping this agreement due to which of the following reasons?
(i) Even though Muria has no incentive to cheat on the agreement,Zenya has an incentive to cheat on the agreement.
(ii) Much like the prisoners' dilemma,both countries are better off reneging on the agreement and building new weapons.
(iii) Both countries want to increase their world power by building new weapons.

• A) (i) and (ii)
• B) (ii) and (iii)
• C) (i) and (iii)
• D) (i), (ii), and (iii)

---

Definitions:

High Cost Reductions

Strategic initiatives or measures taken to significantly lower expenses in order to improve profitability or financial performance.

Low Local Responsiveness

Refers to a company's minimal level of adaptation of its products and services to various local markets due to cost, efficiency, or uniform branding strategies.

International Strategy

A strategy in which global markets are penetrated using exports and licences.

Product Life Cycle

The series of stages that a product goes through from conception, through design and manufacture, to service and disposal including introduction, growth, maturity, and decline.