It can be shown that the Nash equilibrium would indicate that
Without any agreements, the best outcome for each large nation
Would be to:
A)not impose a tariff.
B)impose a tariff.
C)find other ways to reward their domestic firms.
D)impose a consumption tax.

Question

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the strategies of the other players. For large nations, imposing a tariff can be a dominant strategy because it can improve their terms of trade, even though it might lead to retaliation and a suboptimal global outcome.

It Can Be Shown That the Nash Equilibrium Would Indicate