free rider problem

Free Rider Problem

ublic goods have two characteristics that sets them apart; they are non-rival and non-exclusive. Private firms have no incentive to produce such goods since they can’t make everyone pay for them. The Free Rider problem occurs when there is a good (likely to be a public good) that everyone can enjoy the benefits without having to…

introduction to game theory

Introduction to Game Theory

ame theory is the study of rational behavior in situations involving interdependence. Game Theory is a formal way to analyze interaction among a group of rational individuals who behave strategically. Originally, it addressed zero-sum games, in which one person’s gains results in losses for the other participants. A rational individual takes action that is consist with his…

non-durable goods

Durable & Non-Durable Goods

urable goods are those goods that don’t wear out quickly and last over a long period of time. Examples of durable goods include land, cars and appliances. While non-durable goods or soft goods are those goods that have a short life cycle. They are generally used up all at once or have a lifespan of less than three…

theory of efficiency

Theory of Efficiency

here are three different Theories of Efficiency that we are going to focus on. The first Theory of Efficiency is Pareto efficiency or Pareto optimality. The second is the Kaldor–Hicks improvement, and lastly the Zero-profit condition or Zero Profit Theorem. Theory of Efficiency Pareto Efficiency Pareto Efficiency or Pareto optimality is a Theory of Efficiency in which…

division of output between factories

Division of Output between Factories

he division of output between two factories is a case in which you have two factories; an older factory with a higher Marginal Cost and a newer factory with a lower Marginal Cost. To determine how much each factory should produce, you have to draw a horizontal Price/Demand line across the two graphs (of the old and new factory)….

monopolistic competition

Economics of Monopolistic Competition

n Monopolistic Competition, there are many small firms who all have very small shares of the market. Firms have many competitors, but each one sells a slightly different product. Firms are neither price takers (perfect competition) nor price makers (monopolies). Example of Monopolistic Competition The athletic shoe market: When you walk into a sports store to…

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