Stats: L&E: Key Terms

General Stats

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The average score is 51 of 56

Answer Stats

Hint	Answer	% Correct
When a dominant firm uses its power to exclude rivals or harm consumers.	Abuse of dominance	100%
One party in a transaction has more or better information than the other.	Asymmetric information	100%
People judge the likelihood of events based on how easily examples come to mind, which can lead to biased thinking when vivid or recent events dominate memory	Availability heuristic	100%
Humans make decisions with limited cognitive resources, time, and information, often settling for ‘good enough’ rather than optimal choices	Bounded rationality	100%
People aren’t always purely self-interested; they may care about fairness or others’ wellbeing at a cost to themselves	Bounded self-interest	100%
Individuals often struggle to follow through on long-term goals, especially when facing short-term temptations or pressures	Bounded willpower	100%
Limits on how much a firm can produce due to physical or resource limitations. When a firm hits capacity, it cannot increase output without expanding facilities or operations.	Capacity constraints	100%
A mistake in market definition caused by looking at pricing after a firm has already raised prices due to market power.	Cellophane fallacy	100%
A theory stating that if property rights are well-defined and transaction costs are zero, private parties can negotiate to resolve externalities efficiently.	Coase theorem	100%
If transaction costs are low and property rights are well-defined, parties can negotiate to resolve externalities without legal intervention.	Coase Theorem	100%
The idea that competition law should aim to benefit consumers, especially through lower prices and better products.	Consumer welfare focus	100%
Graphs showing a firm’s production costs at different output levels, including fixed, variable, and total costs. They help firms determine the most efficient scale of operation.	Cost curves	100%
A tool to evaluate how much demand would need to drop before a price increase becomes unprofitable.	Critical loss analysis	100%
People often stick with pre-set option when it comes to making choices, choosing familiarity over change even though it may not be in their best self-interest	Default rules matter	100%
Shows the relationship between the price of a good and the quantity consumers are willing to buy. It typically slopes downward, reflecting that people buy less as prices rise.	Demand curve	100%
Relief is given if a knowing party fails to inform an unknowing party, but only when disclosure is low-cost and no substantial investment in information was made.	Doctrine of mistake	100%
Cost advantages that firms experience as they increase production. Larger scale leads to lower per-unit costs due to factors like specialization and bulk purchasing.	Economies of scale	100%
The study of strategic interaction where the outcome for each participant depends on the actions of others.	Game theory	100%
A legal test balancing the cost of preventing harm against the probability and severity of that harm.	Hand formula	100%
A cost-benefit formula used to determine negligence: liability exists if the burden of prevention is less than the probability of harm multiplied by its severity.	Hand formula	100%
A situation where one party in a transaction has more or better information than the other.	Hidden knowledge	100%
A test used in market definition: would a monopoly raise prices profitably in this market?	Hypothetical monopolist	100%
The insured must stand to lose something from the event insured against; prevents gambling, moral hazard, and externalities to uninvolved third parties.	Insurable interest	100%
Insurance does NOT cover deliberate or criminal actions to reduce incentives for harmful behaviour	Intentional acts	100%
A change is efficient if the gainers could compensate the losers and still be better off (even if no actual compensation occurs).	Kaldor-Hicks Efficiency	100%
Aims to steer people's choices in a way that improves their well-being while preserving their freedom to choose. It relies on "nudges"	Libertarian paternalism	100%
The producer whose costs are highest among those currently in the market. This producer sets the market price in competitive markets, as others must match or beat that cost.	Marginal producer	100%
The point where the supply and demand curves intersect, determining the price and quantity at which the market clears. At this point, there is no excess supply or demand.	Market equilibrium	100%
The regulation of mergers to prevent harmful effects on market competition.	Merger control	100%
The smallest production size at which a firm can achieve the lowest average cost. Below this scale, per-unit costs are higher due to underutilised resources.	Minimum efficient scale	100%
When one party takes greater risks because they do not bear the full consequences of their actions, often due to hidden actions.	Moral hazard	100%
Arises AFTER contract is signed; individuals may take more risks because they are insured , making it difficult for the insurer to verify care levels	Moral hazard	100%
A market where a single firm can supply the entire demand at a lower cost than multiple competing firms. This usually occurs when economies of scale are so large that competition is inefficient.	Natural monopoly	100%
Harmful side effects of an economic activity that affect third parties who are not involved in the transaction.	Negative externalities	100%
A market situation where a few dominant firms set prices while considering the likely reactions of competitors.	Oligopoly pricing	100%
An allocation where no one can be made better off without making someone else worse off.	Pareto Efficiency	100%
A market structure where many buyers and sellers exist, products are identical, and no single actor can influence the market price. Firms in perfect competition are price takers.	Perfect competition	100%
People tend to give stronger weight to immediate rewards over future ones, often leading to procrastination or impulsive decisions	Present bias	100%
Refers to how strongly the quantity demanded or supplied responds to price changes. High sensitivity means consumers or producers react strongly to even small price shifts.	Price sensitivity	100%
A game scenario where rational individuals choose to betray each other, even when cooperation would lead to a better outcome.	Prisoners dilemma	100%
A theory analyzing how public decisions are made and how self-interest and incentives affect government behavior.	Public Choice Theory	100%
The total cost to society, including both private costs and externalities caused by a transaction or activity.	Social costs	100%
A method in competition law to define markets by asking if a Small but Significant Non-transitory Increase in Price would be profitable.	SSNIP test	100%
A supply curve with a "step" shape reflects fixed production capacities across producers. Each step represents the entry of a higher-cost producer as demand increases.	Step shape	100%
Represents the relationship between the price of a good and the quantity producers are willing to sell. It generally slopes upward, as higher prices incentivize more production.	Supply curve	100%
The costs of negotiating, enforcing, or monitoring an agreement between parties.	Transaction costs	100%
The insured must disclose ALL relevant information; strict sanctions apply for non-disclosure	Utmost good faith	100%
Contractual tool where the informed party assumes the risk of quality or performance, used to correct information asymmetry.	Warranties	100%
A market failure where buyers or sellers with better private information self-select, leading to poor market outcomes.	Adverse selection	67%
Occurs BEFORE contract; individuals with higher risks are more likely to seek insurance, leading to skewed risk pool.	Adverse selection	67%
Insured may not profit from insurance; only actual losses are compensated. Exceptions include life insurance policies and agreed-sum policies	Indemnity	67%
A game in which one player proposes how to divide a sum of money, and the other can accept or reject it; rejections (even of small unfair offers) highlight people’s concern for fairness.	Ultimatum game	67%
Benefiting from someone else’s investment or effort without paying for it, potentially discouraging future investment.	Free-riding	33%
Evaluates rules or outcomes based on how well they maximise total welfare or allocate resources without waste.	Efficiency perspective	0%
Setting prices equal to the cost of producing one additional unit, promoting allocative efficiency and competitive entry.	Marginal cost pricing	0%
A situation where a dominant firm prevents competitors from entering or competing effectively in a market.	Market foreclosure	0%

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L&E: Key Terms - Statistics