Question
Two countries are considering whether to impose tariffs on each other's imports as part of a trade war. The increase in each country's GDP (measured
Two countries are considering whether to impose tariffs on each other's imports as part of a "trade war." The increase in each country's GDP (measured in billions of dollars) for different combinations of tariffs are shown in the table. If initially Country 1 and Country 2 are not allowed to cooperate, they would arrive at a decision. Will this decision change if the two countries are then allowed to cooperate?
Type Y for Yes or N for No.
Country 2
No Tariff (N)
Low Tariff (L)
High Tariff (H)
No Tariff (N)
75, 75
20, 100
15, 140
Country 1
Low Tariff (L)
100, 20
50, 50
20, 100
High Tariff (H)
140, 15
100, 20
25, 25
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