Exam 17: Oligopoly

Table 17-27 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation). Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland. -Refer to Table 17-27. Pursuing its own best interests, Farland will impose trade sanctions against U.S. firms

Which of the following statements is (are) true of the prisoners' dilemma? (i)Rational self-interest leads neither party to confess. (ii)Cooperation between the prisoners is difficult to maintain. (iii)Cooperation between the prisoners is individually rational.