Question 1

If each of us could produce everything we needed for ourselves,we would be considered to be ________.

Accepted Answer

The answer of If each of us could produce everything...

Question 2

The principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off.

Accepted Answer

The principle of voluntary exchange is based on the idea that both parties involved in a transaction have a mutual benefit from the exchange, meaning that both parties receive something they value more than what they gave up. Therefore, a voluntary exchange makes both people better off.

Question 3

Suppose that a house painter can earn $200 per day painting houses while Jasper Johns earns $5,000 per day painting art.According to the application,Jasper Johns should:

Accepted Answer

Jasper Johns should paint his house if he can paint his house at least 25 times faster than a house painter.

Question 4

The principle of diminishing returns implies that when one input increases while the other inputs are held fixed,output: beyond some point will exhibit:

Accepted Answer

The principle of diminishing returns states that as more of one input is added to a fixed amount of other inputs, the additional output generated from the additional input will eventually decrease. This means output increases, but at a decreasing rate.

Question 5

Two parties engage in exchange when each one expects to be made better off by the exchange.

Accepted Answer

This is the definition of exchange in economics. Two parties engage in exchange because they both believe they will benefit from the transaction.

Question 6

According to the principle of diminishing returns,if all factors of production but one are held constant and if that one factor is doubled,then eventually output will most likely:

Accepted Answer

The principle of diminishing returns states that as one factor of production is increased while holding all others constant, there will eventually be a point where the marginal product of that factor begins to decrease. Therefore, if all factors of production but one are held constant and that one factor is doubled, eventually output will increase by less than double, as the law of diminishing marginal returns kicks in.

Question 7

Being self-sufficient in the production of everything we need is efficient.

Accepted Answer

Being self-sufficient in the production of everything we need would be extremely time-consuming and inefficient. It is more efficient to specialize in certain areas of production and trade with others for goods and services we need. This allows for economies of scale and increases overall productivity.

Question 8

The economic reason why you voluntarily pay tuition to get into the university/college that you are in right now is because:

Accepted Answer

The answer of The economic reason why you voluntarily pay...

Question 9

Firms that make their customers better off get more repeat business and make earn more profits.

Accepted Answer

This statement is true as firms that improve their customers' quality of life, solve their problems and meet their needs, are likely to have a loyal customer base and therefore earn more profits. By providing better customer service and delivering more value, firms can increase customer satisfaction, which is a key driver of customer loyalty and repeat business.

Question 10

When does voluntary exchange take place?

Accepted Answer

The answer of When does voluntary exchange take place?...

Question 11

Suppose that a house painter can earn $200 per day painting houses and painting Jasper Johns' house requires 25 days of labor.According to the application,if Jasper Johns earns $5,000 per day painting art,then he must:

Accepted Answer

The answer of Suppose that a house painter can earn...

Question 12

According to the application,if Jasper Johns earns $5,000 per day painting art and $1,500 per day painting houses,he should:

Accepted Answer

Jasper Johns should only paint art because he earns significantly more per day ($5,000) compared to painting houses ($1,500).

Question 13

When two parties engage in voluntary exchange,one must be made worse off.

Accepted Answer

This statement is false. In a voluntary exchange, both parties believe that they will be better off as a result of the exchange, otherwise they would not choose to participate in it. Otherwise, they would not make a voluntary exchange.

Question 14

The economic reason why some individuals choose keep their tuition money and not to go to school is:

Accepted Answer

This choice reflects the economic reason why some individuals choose to keep their tuition money instead of going to school. They believe that the value they will receive from education is lower than the tuition cost, leading them to prioritize keeping their money over pursuing an education.

Question 15

The principle that "as one input increases while the other inputs are held fixed,output beyond some point will exhibit increases at a decreasing rate" is known as the:

Accepted Answer

The principle described refers to the Law of Diminishing Returns, which states that as additional units of one input are added to fixed quantities of other inputs, the total output will eventually increase at a decreasing rate, until it reaches a point where it starts to decrease. This is due to factors such as limited resources and diminishing productivity of additional inputs.

Question 16

People acting in their own self interest try to gain at the expense of others in exchange leads to someone necessarily losing in a voluntary exchange.

Accepted Answer

This statement is not always true. Voluntary exchanges can happen where both parties gain and no one necessarily loses. It depends on the circumstances of the exchange and the level of cooperation between the parties involved.

Question 17

The only way individuals can cope with scarcity is by being self-sufficient.

Accepted Answer

While self-sufficiency is a possible strategy for coping with scarcity, it is not the only way. Individuals can also cooperate with others to share resources, trade with others who have different resources, or innovate and develop new technologies to make better use of scarce resources.

Question 18

When you have a job and your employer compensates you for your time with money,resulting in both of you being better off,it is an example of a voluntary exchange.

Accepted Answer

When an employer compensates an employee for their time, it is a voluntary exchange as both parties agree to the terms of the exchange and benefit from it.

Question 19

A "market" is an arrangement that enables people to exchange goods and services.

Accepted Answer

A market is a place or arrangement where buyers and sellers come together to exchange goods and services. It can be physical or digital, and it facilitates transactions between parties.

Question 20

Diminishing returns occurs because:

Accepted Answer

Diminishing returns occur when one of the inputs to the production process (such as labor, capital, or land) is fixed and cannot be increased in the short term. As more of the variable input (such as labor) is added, the marginal product (the additional output produced by each additional unit of the variable input) eventually decreases, leading to diminishing returns.

Quiz 2: The Key Principles of Economics