negative economic profits but will try to remain open.

positive economic profits.

zero economic profits.

negative economic profits and will shut down.

is maximizing profits.

will increase its profits if it lowers its price and expands its production level.

will increase its profits if it raises its price and reduces its production level.

will increase its profits if it raises its prices and expands its production level.

self interest results in the Nash equilibrium which is the best outcome for the players.

each player tries to capture a large portion of the market share.

the game becomes more competitive.

the players play the game not once but many times.

zero economic profits.

negative economic profits and will shut down.

positive economic profits.

negative economic profits but will try to remain open.

too few firms in the market.

over-investment.

the entry of new firms.

a violation of conventional market forces.

$3000

$1000

$5000

$2000

(ii) only

(i) and (iii)

(i), (ii), and (iii)

(ii) and (iii)

P2

P1

P3

P4

panel b

panel a

panel c

panel d

P2

P4

P1

P3

To maximize profit, firms should produce at a level of output where price equals average variable cost.

The amount of gold in the world is limited. Therefore, the gold jewelry market probably has a long-run supply curve that is upward sloping.

Long-run supply curves are typically more elastic than short-run supply curves.

In a long-run equilibrium, marginal firms make zero economic profit.

panel c

panel a

panel d

panel b

can be difficult to maintain, even when cooperation would make both players of the game better off.

always works to the benefit of society as a whole.

can be difficult to maintain, but only when cooperation would make at least one of the players of the game worse off.

always works to the detriment of society as a whole.

P4

P2

P1

P3

accounting profits are zero.

marginal revenue equals marginal cost.

economic profits are zero.

price equals minimum marginal cost.