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