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Students' Questions Answered by Dirk Topics

Do all games have dominant strategies?

No, consider Paper, Rock, Scissors. This simple game has no dominant strategy. Paper beats rock ... more

  • Asked by Anonymous
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  • 5 10

What is Allais paradox?

The Allais paradox explain how risk tolerance changes across income. It explains why someone might ... more

  • Asked by Anonymous
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  • 5 2

What is the definition of the social optimum?

The social optimum is the best P and Q combination for all of society -- it is reached by eliminating ... more

  • Asked by Anonymous
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  • 5 1

Can you define efficiency and give a few examples?

Efficiency means doing something at the lowest possible cost. For the firm that means operating ... more

  • Asked by Anonymous
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  • 5 1

If a perfectly competitive firm is at the breakeven point, does this mean that it has an accounting profit of zero?

Actually, it has an economic profit of zero and a positive accounting profit. The difference occurs ... more

  • Asked by Anonymous
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Can you give me an example of a sunk cost? The definition is still a little abstract to me.

Try thinking of your car. If you decide to keep your old car (because it still runs) when you'd ... more

  • Asked by Anonymous
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I have been reading Paul Krugman and he talks about the confidence fairy... what is the free market answer to rebuttal the confidence fairy?

 

Good question. There is no simple answer. Confidence is a hugely important aspect ... more

  • Asked by Chris B. from Silverton HS
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Hi Dirk, First of all, cool web page. I have always been a little confused about the concepts of the "income effect" and "substitution effect". Could you explain these concepts in a simple way? Econ student from Dominican Republic.

I'm glad you found my webpage.  The income effect refers to the purchasing power of your ... more

  • Asked by Anonymous
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How does the real interest rate, the nominal interest rate, and the equilibrium quantity of loanable funds change when the expected inflation rate increases?

Since the increase in inflation is expected this has no affect on the real rate of interest but ... more

  • Asked by Ted .
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why do changes in monetray policy have different effects over different time horizons?

Monetary policy, like fiscal policy, has short-term and long-term impacts. The immediate impact ... more

  • Asked by Olusegun S.
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