THEME 1

Question 1

Trade

Answer 1

Voluntary act between two parties, each giving something to the other in exchange of something in return.

Question 2

Utility

Answer 2

Abstract concept reflecting the satisfaction an individual derives from an activity.

Question 3

Name 2 advantages of the concept of utility:

Answer 3

Flexibility
Takes aspects other that monetary gains into account

Question 4

Name a drawback/disadvantage of the concept of utility:

Answer 4

Difficult to use

Question 5

Valuation

Answer 5

Monetary value that an individual attaches to a given activity, and that he would be able to pay.

Question 6

What is the variable used to represent buyer’s valuation

Answer 6

V

Question 7

What is buyer’s valuation (V)?

Answer 7

The maximum amount of money he is willing to pay
Or «willingness to pay»

Question 8

What is the variable used to represent seller’s valuation?

Answer 8

C

Question 9

What is the seller’s valuation (C)?

Answer 9

Lowest amount of money she is willing to accept in order to give up an item.
Related to the buyer’s cost
«willingness to accept»

Question 10

Formule de total gains from trade

Answer 10

V-C

Question 11

Does the price have an effect in total gains from trade?

Answer 11

No

Question 12

Formule de gain (or surplus) for the buyer:

Answer 12

V-P

Question 13

Formule de gain (or surplus) for the seller:

Answer 13

P-C

Question 14

Trade will take place if … (Rapport = ≥ > ≤ < entre des variables)

Answer 14

V ≥ C

Question 15

The buyer and seller will agree to trade if … (Rapport entre variables)

Answer 15

C ≤ P ≤ V

Question 16

Meaning of V(q)

Answer 16

Willingness to pay to obtain q units of the good
Or
Maximal amount of the money the buyer is willing to pay to obtain q units of the good

Question 17

What’s the buyer’s marginal valuation ? (Def et formule)

Answer 17

Willingness to pay to obtain one extra unit of the good.
MV(q)=V(q)-V(q-1)

Question 18

What is C(q)?

Answer 18

Seller’s total cost
Willingness to accept in exchange of q units of the good.
Minimum amount of money the seller is willing to accept in exchange for a total of q units.

Question 19

What is seller’s marginal cost

Answer 19

Willingness to accept in exchange of one more unit of the good.
MC(q) = C(q) - C(q-1)