Author Question: The table above shows the PPF of an island community. This community's opportunity cost of producing ... (Read 164 times)

genevieve1028 · **on:** Jun 29, 2018

The table above shows the PPF of an island community. This community's opportunity cost of producing 1 pound of fish ______.

A. is the increase in the quantity of berries gathered as the quantity of fish increases by 1 pound
B. increases as the quantity of berries gathered increases
C. is 10 pounds of berries if the quantity of fish increases from 2 to 3 pounds
D. increases as the quantity of fish caught increases

Question 2

Many people buy fire insurance when they are not required to do so. What does this tell you about their risk preferences?

What will be an ideal response?

chevyboi1976 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

It tells you that most people are risk averse. They are unwilling to take a risk because the costs of losing in terms of their well-being or utility exceed the gains of possibly winning. Winning in this case is defined as one's house not catching fire. Losing is when it burns without having purchased fire insurance.