5 Written Questions

1. a good that is difficult, or costly, to exclude nonpayers from consuming
2. a firm that charges each buyer exactly his or her reservation price
3. the percentage change in the quantity demanded of a good that results from a 1 percent change in its price
4. to maximize utility, spending must be allocated across goods so that the marginal utility per dollar is the same for each good
5. he difference between the quantity supplied and the quantity demanded when the price of a good lies below the equilibrium price

5 Matching Questions

1. economic profit
2. marginal benefit
3. better-than-fair gamble
4. adverse selection
5. informational asymmetry

1. a occurs when two parties in a relationship do not have the same level of knowledge of product quality
2. b the parttern that occurs when, at any given cost of insurance, peole with a greater expectation of loss buy insurance while people with a lower expected value of claims choose not to buy insurance
3. c a gamble whose expeceted value is positive
4. d the difference between a firm's total revenue and the sum of its explicit and implicit costs
5. e the increase in total benefit that results from carrying out one more unit of an activity

5 Multiple Choice Questions

1. a good whose consumption by one person does not diminish its availability for others
   1. nonrival good
   2. inferior good
   3. marginal cost
   4. normal good
2. a cost that does not very with the level of an activity
   1. elastic
   2. fixed cost
   3. variable cost
   4. fair gamble
3. any other strategy available to a player who has a dominant strategy
   1. dominant strategy
   2. dominated strategy
   3. inelastic
   4. nominal price
4. a way of changing incentives so as to make otherwise empty threats or promises credible
   1. commitment device
   2. commitment problem
   3. nominal price
   4. commons good
5. Having to make a choice- more of one good thing means having less of another
   1. fair gamble
   2. market power
   3. commitment problem
   4. The Scarcity Problem

5 True/False Question

1. commons good → one for which nonpayers can easily be excluded and for which each unit consumed by one person means one fewer unit is available for others
   

   True        False

2. market power → a firm's ability to raise the price of a good without losing all its sales
   

   True        False

3. price taker (perfectly competitive firm) → a firm with at least some latitude to set its own price
   

   True        False

4. point elasticity of demand → the percentage change in the quantity demanded of a good that results from a 1 percent change in its price
   

   True        False

5. technical efficiency in production → occurs when the least possible amount of inputs is used to produce a given level of output
   

   True        False