Econ final
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
dominant strategy
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
Capital
economy's stock of equipment and structures
derived demand
firm's demand for a factor of production is derived from decision to supply a good in another market
perfect price discrimination
monopolist knows exactly each customer's willingness to pay and can charge each customer a different price
tit for tat strategy
player cooperates until the other player defects; then she defects until the other player cooperates again
Efficient scale
quantity that minimizes average total cost
price discrimination
the business practice of selling the same good at different prices to different customers
Predatory pricing
Low prices can drive competitor out of market so other firm can recapture monopoly and raise prices
natural monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
Duopoly
Oligopoly with two members
prisoners' dilemma
a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
monopoly
a firm that is the sole seller of a product without close substitutes
cartel
a group of firms acting in unison
monopolistic competition
a market structure in which many firms sell products that are similar but not identical
oligopoly
a market structure in which only a few sellers offer similar or identical products
collusion
an agreement among firms in a market about quantities to produce or prices to charge
synergies
benefits from mergers
imperfect competition
industry that fall somewhere between perfect competition and monopoly
marginal product of labor
the increase in the amount of output from an additional unit of labor
factors of production
the inputs used to produce goods and services
value of the marginal product
the marginal product of an input times the price of the output
arbitrage
the process of buying a good in one market at a low price and selling it in another market at a higher price to profit
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
production function
the relationship between the quantity of inputs used to make a good and the quantity of output of that good
game theory
the study of how people behave in strategic situations
