1) A society can produce two good: peanut butter and jam. the society\'s product

Question

1) A society can produce two good: peanut butter and jam.  the society's production possibility frontier is negatively sloped and "bowed outward" from the orgin.  As this society moves down its production possibility frontier producing more and more peanut butter, the opportunity cost of the producing peanut buttter

a) decreases  

b) remains contant

c) increases

d) could decrease or increase depending on the technology

2) As more of the good, such as jam is produced the opportunity costs of producing it increase.  This most likely occurs because

a) as more of a good is produced the inputs used to produce that good will decrease in price.

b) consumers would be willing to pay higher prices for the good as more of the good is produced.

c) resources are not equally well-suited to producing all goods and as more of of a good is produced it is necessary to use resources less well-suited to the production of the good.

d) there's no accounting for taste.

3) What effect is working when the price of good increases and consumers tend to buy another good instead of it?

a) the income effect.

b) the substitution effect

c) the diminishing marginal utility effect

d) the cteris paribus effect

4) If the demand for Cap'n Crunch decreases as income increases, Cap'n Crunch is?

a) a normal good

b) an inferior good

c) a capital good

d) a complementary good   

Explanation / Answer

1)d) could decrease or increase depending on the technology

2)c) resources are not equally well-suited to producing all goods and as more of of a good is produced it is necessary to use resources less well-suited to the production of the good.

3)b) the substitution effect

4)a) a normal good

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