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

question 248

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.Which of the following statements is true?

• A)The Nash equilibrium is a noncooperative, dominant strategy equilibrium.
• B)The Nash equilibrium is a cooperative equilibrium.
• C)The Nash equilibrium is a collusive equilibrium.
• D)There is no Nash equilibrium in this game because each party pursues its dominant strategy.

---

Definitions:

Elasticities

Measures in economics that demonstrate how the quantity demanded or supplied of a good responds to changes in price or other factors.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization.

Beef Prices

The market value or cost of beef at a given time, influenced by factors like supply and demand.

Wage Increase

An upward adjustment in the salary or hourly pay rate of workers, often in response to factors like cost of living adjustments, performance evaluations, or market conditions.