Suppose that 400 people are choosing between Action X and Action Y. The relative payoffs of the two actions depend on how many of the 400 people choose Action X and how many choose Action Y. The...

Suppose that 400 people are choosing between Action X and Action Y. The relative payoffs of the two actions depend on how many of the 400 people choose Action X and how many choose Action Y. The payoffs are as shown in the following diagram, but the vertical axis is not labeled, so you do not know whether the lines show the benefits or the costs of the two actions.

(a) You are told that the outcome in which 200 people choose Action X is an unstable equilibrium. If 100 people are currently choosing Action X, would you expect the number of people choosing X to increase or decrease over time? Why?

(b) For the graph to be consistent with the behavior that you described in part (a), should the lines be labeled as indicating the costs or benefits of Action X and Action Y? Explain your answer.