Table 14-3 Suppose OPEC Has Only Two Producers, Saudi Arabia and Ecuador

question 141

Multiple Choice

Table 14-3

Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 14-3 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 14-3.Is there a dominant strategy for Ecuador and, if so, what is it?

• A)Yes, it has a dominant strategy depending on what Saudi Arabia does.
• B)No, there is no dominant strategy.
• C)Yes, the dominant strategy is to produce a low output.
• D)Yes, the dominant strategy is to produce a high output.

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