Chapter 11 Post Quiz
Uncertainty and Game Theory

Matching Questions:

Match the terms on the left with the definition in the column on the right. Enter the lowercase letter of that definition in the box to the left of the question number.

	1. Speculation	a. An action that reduces the risks involved in owning an asset or commodity by making a counteracting sale of that asset.
	2. Arbitrage	b. A process that transfers risk from one person to many people as small risk.
	3. Price difference	c. This will generally be less than the cost of moving the good from one market to the other as a result of arbitrage.
	4. Hedging	d. Occurs when people with the highest risk are most likely to buy insurance.
	5. Speculative markets	e. When the displeasure from losing a given amount of income is greater than the pleasure from gaining the same amount of income will cause a person to be.
	6. Risk-averse	f. Buying and selling assets or commodities with the purpose of making profits from the fluctuations in prices.
	7. Risk spreading	g. A form of risk spreading.
	8. Insurance	h. Improve price, improve allocation patterns, and transfer risks.
	9. Moral hazard	i. The purchase of a good or asset in one market for immediate resale in another market in order to profit from a price discrepancy.
	10. Adverse selection	j. The situation where people know about their own health status or level of risk, but the insurance company does not.
	11. Asymmetric information	k. Mandatory insurance provided by the government.
	12. Game Theory	l. A process that reduces a person's incentives to avoid or prevent a risky event and thereby changes the probability of loss.
	13. Duopoly price game	m. Analyzes the way that two or more players choose strategies that jointly affect each other.
	14. Social insurance	n. A situation where the market is supplied by two firms that are deciding whether to engage in economic warfare of prices.
	15. Dominant equilibrium	o. Exists when all players have a dominant strategy.
	16. Dominant strategy	p. Noncooperative equilibrium
	17. Nash equilibrium	q. Arises when one player has a single best strategy no matter what strategy the other player follows.