Russia and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel for natural gas. The two strat
egies these countries face are to comply with the cartel agreement or to cheat on the cartel agreement. If both countries comply, the economic profit for each will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other country will have an economic loss of $10 million. If all countries cheat, they break even. What is the outcome of this game if it is only played once
1 answer:
Answer:
The outcome of this game is that both countries will cheat
Explanation:
Solution
Recall that
For Russia:
If Qatar cheats or found cheating is = zero cheat
If Qatar co-operates = 140 million (co-operates or comply)
For Qatar:
If Russia cheats or found cheating is = it is considered as a zero cheat
If Russia cooperates = 140 million (co-operates or comply)
So,
The outcome of equilibrium = (0,0)
Therefore the outcome of this game is that both countries will cheat
Note: Kindly find an attached copy of part of the solution to the question given.
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Answer: B
The marginal propensity to save will remain unchanged in each of the countries.
Explanation:
Marginal propensity to consume (MPC) is the percentage of increase or decrease in income that goes to consumption
Marginal propensity to save (MPS) is the percentage of increase or decrease in income that goes into savings. It can also be expressed as:
1 - MPC
Average propensity to save measures the level of saving at a given level of income.
The marginal propensity to save measures changes in savings relative to changes in income but the income remains unchanged here, the MPS also remains unchanged.
