In the Game-Theoretic Analysis of Tariff Reaction Functions of Two

Multiple Choice

In the game-theoretic analysis of tariff reaction functions of two governments, suppose that the equilibrium position has been attained (i.e., the countries are located at the intersection of their respective tariff reaction functions) . If, from this equilibrium position, one country reduces its tariff rate while the other country does not change its tariff rate, the result, other things equal, is that the country that has reduced its tariff will experience __________.

A) an increase in its welfare
B) no change in its welfare.
C) a decrease in its welfare.
D) an increase, no change, or a decrease in its welfare - cannot be determined without more information.