Definitions

Question 0

Define Prisoners Dilemma

Answer 0

Two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. Both protect themselves at the expense of the other. Worse state than if they had cooperated

Question 1

Define Pareto efficiency

Answer 1

Resources are allocated in most efficient manner so one party’s situation can not be improved without making another party’s situation worse. Does not imply inequality or fairness

Question 2

Define producer surplus

Answer 2

An Econ measure of difference between amount a producer of a good recovers and min they would have accepted

Question 3

Moral hazard

Answer 3

Risk a party to a transaction might take risks against a contract to benefit for themselves