When a Market Is Efficient

question 46

Multiple Choice

When a market is efficient:

• A) there is no exchange that can make anyone better off without someone becoming worse off.
• B) a central planner must be involved.
• C) total surplus is zero.
• D) an increase in price will reduce the deadweight loss.

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Definitions:

Tit-for-tat

A strategy in game theory where a player responds to an opponent's action with equivalent action, promoting cooperation by rewarding cooperation and punishing defection.

Prisoner's Dilemma

A scenario in game theory that illustrates why individuals might not cooperate, even when it seems that doing so would be in their collective best interest.

Zero-sum Game

A situation in competitive theory where one party's gain is exactly balanced by the losses of others. In a zero-sum game, the total benefit to all players in the game, for every combination of strategies, always adds up to zero.

Non-zero-sum Game

A scenario in game theory where the sum of outcomes for all players does not equal zero, allowing for mutual benefit or loss.