Econ Exam #3

grim trigger strategy

A strategy where a firm responds to underpricing by choosing a price so low that each firm makes zero economic profit

Coordination game

A type of game in which a Nash equilibrium occurs when each player chooses the same strategy; neither player can do better than matching the other player's strategy

economic intervention

Is any action taken by a government or an international institution in a market economy in an effort to impact the economy beyond the basic regulation of fraud and enforcement of contracts and provision of public goods.

Prisoner's dilemma

a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial

Nash equilibrium

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

nudge

a slight push or shake

What is the dominant factor determining market price in the long run (assuming the industry has unrestricted entry)?

average costs

Market power determines the shape of a firm's

demand curve

Free entry into a market tends to cause _____ to disappear.

desirable opportunities

In a perfectly competitive labor market, the manager's hiring decision is about

how many workers to hire

The output in a market with market power is

inefficient because the marginal benefit to society of extra output exceeds the marginal cost.

Almira is a chocolatier with a small chocolate shop. There are three other chocolatiers in her city. Almira should be concerned that new companies will enter her city's chocolate market and take away some of her customers if the average chocolatier in her city:

is earning economic profit

What is the impact of higher wages on labor supply according to the income effect?

leisure is more attractive

When the government requires that a person have a license to work in a particular occupation, then in the labor market for that occupation:

supply decreases

What happens in the labor market for biologists when wages in other, similar occupations fall?

there is a rightward shift in supply

Anti-coordination game

when your best response is to take a different (but complementary) action to the other player