In game theory, a Nash equilibrium occurs when:
Correct answer: B. Each player's strategy is optimal given the others' strategies
- A. Every firm earns the same profit
- B. Each player's strategy is optimal given the others' strategies
- C. The government fixes the market price
- D. Total industry output reaches its maximum
Explanation
At a Nash equilibrium, no participant can improve its outcome by changing strategy alone while the other strategies remain unchanged. The condition does not require equal profits or maximum total output.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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