Refer to Table 14-9. Saudi Arabia and Yemen must decide how much ...

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Refer to Table 14-9. Saudi Arabia and Yemen must decide how much oil to produce. Since the demand for oil is inelastic, relatively low production rates drive up prices and profits.
 
  Saudi Arabia, the world's largest and lowest-cost producer, is able to influence market price; it has an incentive to keep output low. Yemen, on the other hand, is a relatively high-cost producer with much smaller reserves. Use the payoff matrix in Table 14-9 to answer the following questions.
  a. What is the dominant strategy for Saudi Arabia?
  b. What is the dominant strategy for Yemen?
  c. What is the Nash equilibrium?

Question 2

If you pay 2,000 in taxes on an income of 20,000, and a tax of 3,500 on an income of 30,000, then over this range of income the tax is
 
  A) regressive.
  B) proportional.
  C) progressive.
  D) There is insufficient information to answer the question.

[Melissahxx]

Answer to Question 1

a. Saudi Arabia's dominant strategy is to produce a low output
b. Yemen's dominant strategy is to produce a high output.
c. The Nash equilibrium has Saudi Arabia producing a low output and Yemen a high output.

Answer to Question 2

C

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Excellent

[steff9894]

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