SOLUTION MANUAL FOR #z #z
Foundations of Business 7e William M. Pride;
#z #z #z #z #z #z
Chapter #z1-47
Chapter 1 #z
End of Chapter Questions
#z #z #z
Quiz #zYourself
1. Scarcity #zimplies #zthat #zthe #zallocation #zdecision #zchosen #zby #zsociety #zcan
a) not #zmake #zmore #zof #zany #zone #zgood.
b) always #zmake #zmore #zof #zany #zgood.
c) typically #zmake #zmore #zof #zone #zgood #zbut #zat #zthe #zexpense #zof #zmaking
#zless #zof #zanother.
d) always #zmake #zmore #zof #zall #zgoods #zsimultaneously.
#zExplanation: #zScarcity #zimplies #zthat #zchoices #zinvolve #ztrade-
offs.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-01
Topic: #zEconomics #zand #zOpportunity #zCost
2. A #zproduction #zpossibilities #zfrontier #zis #za #zsimple #zmodel #zof
a) allocating #zscarce #zinputs #zto #zthe #zproduction #zof #zalternative #zoutputs.
a) price #zand #zproduction/consumption #zin #za #zmarket.
b) the #zcost #zof #zproducing #zgoods.
c) the #znumber #zof #zinputs #zrequired #zto #zproduce #zvarying #zlevels #zof #zoutput.
# z Explanation: #zThe #zproduction #zpossibilities #zfrontier #zshows #zthe #zquantity #zof #ztwo
#zgoods #zthat #zcan #zbe #zproduced. #z It #zimplies #zthat #zscarcity #zrequires #zthat #zchoices #zbe
#zmade #zas #zto #zhow #zto #zuse #zresources.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-01
Topic: #zModeling #zOpportunity #zCost #zUsing #zthe #zProduction #zPossibilities #zFrontier
Page #z1
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
,3. The #zunderlying #zreason #zthat #zthere #zare #zunattainable #zpoints #zon #za #zproduction
#zpossibilities #zfrontier #zis #zthat #zthere
a. is #zgovernment.
b. are #zalways #zchoices #zthat #zmust #zbe #zmade.
c. are #zscarce #zresources #zwithin #za #zfixed #zlevel #zof #ztechnology.
d. is #zunemployment #zof #zresources.
Explanation: #zThe #zpoints #zoutside #zthe #zproduction #zpossibilities #zfrontier #zare #zunattainable.
#zThis #zmeans #zthat #zcurrently #zavailable #zresources #zand #ztechnology #zare #zinsufficient #zto
#zproduce #zamounts #zgreater #zthan #zthose #zillustrated #zon #zthe #zfrontier. #zOn #za #zgraph,
#zeverything #zbeyond #zthe #zfrontier #zis #zunattainable.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zRemember
Difficulty: #z01 #zEasy
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-01
Topic: #zModeling #zOpportunity #zCost #zUsing #zthe #zProduction #zPossibilities #zFrontier
4. The #zunderlying #zreason #zproduction #zpossibilities #zfrontiers #zare #zlikely #zto #zbe
#zbowed #zout #z(rather #zthan #zlinear) #zis #zbecause
a. choices #zhave #zconsequences.
b. there #zare #zalways #zopportunity #zcosts.
c. some #zresources #zand #zpeople #zcan #zbe #zbetter #zused #zproducing #zone #zgood
#zrather #zthan #zanother.
d. there #zis #zalways #zsome #zlevel #zof #zunemployment.
Explanation: #zIf #zthe #zproduction #zpossibilities #zfrontier #zis #znot #za #zline #zbut #zis #zbowed #zout
#zaway #zfrom #zthe #zorigin, #zthen #zopportunity #zcost #zis #zincreasing. #zThe #zreason #zfor #zthis #zis
#zthat #zas #zwe #zadd #zmore #zresources #zto #zthe #zproduction #zof, #zfor #zexample, #zpizza, #zwe #zare
#zusing #zfewer #zresources #zto #zproduce #zsoda. #zCompounding #zthat #zproblem, #zat #zeach #zstage
#zas #zwe #ztake #zthe #zresources #zaway #zfrom #zsoda #zand #zput #zthem #zinto #zpizza, #zwe #zare
#zmoving #zworkers #zwho #zare #zworse #zat #zpizza #zproduction #zand #zbetter #zat #zsoda #zproduction
#zthan #zthose #zmoved #zin #zthe #zprevious #zstage. #zThis #zmeans #zthat #zthe #zincrease #zin #zpizza
#zproduction #zis #zdiminishing #zand #zthe #zloss #zin #zsoda #zproduction #zis #zincreasing. #zAn
#zeconomist #zwould #zcall #zthis #zan #zexample #zof #zincreasing #zopportunity #zcost. #z If #zthe
#zproduction #zpossibilities #zfrontier #zis #za #zstraight #zline #zthat #zis #znot #zbowed #zout #zaway
#zfrom #zthe #zorigin, #zthen #zopportunity #zcost #zis #zconstant.
AACSB: #zKnowledge #zApplication
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zRemember
Difficulty: #z01 #zEasy
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-02
Topic: #zAttributes #zof #zthe #zProduction #zPossibilities #zFrontier
Page #z2
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
,5. Suppose you were modeling the impact of the introduction of computer automation
into manufacturing on a production possibilities frontier (PPF) with two manufactured
goods on their respective axes. It would be more likely that the result would be .
a) generalized growth with the PPF moving both up and to the right.
b) specialized growth with the PPF moving both up and to the right.
c) generalized growth with the PPF just moving up and not to the right.
d) specialized growth with the PPF just moving up and not to the right.
Explanation: Computer automation is a general improvement in technology so it would
improve all manufacturing. As a result, it would result in generalized growth and move
the PPF both up and to the right.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-03
Topic: Economic Growth
6. The optimization assumption suggests that people make
a. irrational decisions.
b. unpredictable decisions.
c. decisions to make themselves as well off as possible.
d. decisions without thinking very hard.
Explanation: The optimization assumption suggests that the person in question is trying
to maximize some objective. Consumers are assumed to be making decisions that
maximize their happiness subject to a scarce amount of money.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-01
Topic: Thinking Economically
Page #z3
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
, 7. Imagine #zan #zeconomist #zordering #zdonuts #zone-by-one. #zWhen #zdeciding #zhow #zmany
#zdonuts #zto #zorder #zthey #zwould #zpick #zthat #znumber #zwhere #zthe #zenjoyment #zof #zthe #z
equals #zthe #zenjoyment #zthey #zcould #zget #zfrom #zusing #zthe #zmoney #zon #zanother #zgood.
a. first #zdonut
b. last/marginal #zdonut
c. average/typical #zdonut
d. total #znumber #zof #zdonuts
Explanation: #zThe #zenjoyment #zof #zthe #zlast #zslice #zis #zthe #zmarginal #zbenefit #zof #zthat #zslice. #zIf
#zthis #zenjoyment #zis #zmore #zthan #zthe #zenjoyment #zfrom #zsome #zalternative, #zmore #zwill #zbe
#zconsumed.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
# z Learning #zObjective: #z01-04
#zTopic: #zThinking
#zEconomically
8. Of #zcourse, #zall #zindividual #zstudents #zare #zbetter #zoff #zif #zthey #zearn #zbetter #zgrades. #zIf
#z you #zwere #zto #zconclude #zthat #zall #zstudents #zwould #zbe #zbetter #zoff #zif #zeveryone #zreceived
#zan #zA, #z you #zwould
a. have #zfallen #zvictim #zto #zthe #zfallacy #zof #zscarcity.
b. be #zright.
c. have #zfallen #zvictim #zto #zthe #zfallacy #zof #zcomposition.
d. be #zmistaking #zcorrelation #zwith #zcausation.
Explanation: #zThe #zfallacy #zof #zcomposition #zis #zthe #zmistake #zin #zlogic #zthat #zsuggests #zthat
#zthe #ztotal #zeconomic #zimpact #zof #zsomething #zis #zalways #zand #zsimply #zequal #zto #zthe #zsum
#zof #zthe #zindividual #zparts.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
# z Learning #zObjective: #z01-04
#zTopic: #zThinking
#zEconomically
Page #z4
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
Foundations of Business 7e William M. Pride;
#z #z #z #z #z #z
Chapter #z1-47
Chapter 1 #z
End of Chapter Questions
#z #z #z
Quiz #zYourself
1. Scarcity #zimplies #zthat #zthe #zallocation #zdecision #zchosen #zby #zsociety #zcan
a) not #zmake #zmore #zof #zany #zone #zgood.
b) always #zmake #zmore #zof #zany #zgood.
c) typically #zmake #zmore #zof #zone #zgood #zbut #zat #zthe #zexpense #zof #zmaking
#zless #zof #zanother.
d) always #zmake #zmore #zof #zall #zgoods #zsimultaneously.
#zExplanation: #zScarcity #zimplies #zthat #zchoices #zinvolve #ztrade-
offs.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-01
Topic: #zEconomics #zand #zOpportunity #zCost
2. A #zproduction #zpossibilities #zfrontier #zis #za #zsimple #zmodel #zof
a) allocating #zscarce #zinputs #zto #zthe #zproduction #zof #zalternative #zoutputs.
a) price #zand #zproduction/consumption #zin #za #zmarket.
b) the #zcost #zof #zproducing #zgoods.
c) the #znumber #zof #zinputs #zrequired #zto #zproduce #zvarying #zlevels #zof #zoutput.
# z Explanation: #zThe #zproduction #zpossibilities #zfrontier #zshows #zthe #zquantity #zof #ztwo
#zgoods #zthat #zcan #zbe #zproduced. #z It #zimplies #zthat #zscarcity #zrequires #zthat #zchoices #zbe
#zmade #zas #zto #zhow #zto #zuse #zresources.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-01
Topic: #zModeling #zOpportunity #zCost #zUsing #zthe #zProduction #zPossibilities #zFrontier
Page #z1
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
,3. The #zunderlying #zreason #zthat #zthere #zare #zunattainable #zpoints #zon #za #zproduction
#zpossibilities #zfrontier #zis #zthat #zthere
a. is #zgovernment.
b. are #zalways #zchoices #zthat #zmust #zbe #zmade.
c. are #zscarce #zresources #zwithin #za #zfixed #zlevel #zof #ztechnology.
d. is #zunemployment #zof #zresources.
Explanation: #zThe #zpoints #zoutside #zthe #zproduction #zpossibilities #zfrontier #zare #zunattainable.
#zThis #zmeans #zthat #zcurrently #zavailable #zresources #zand #ztechnology #zare #zinsufficient #zto
#zproduce #zamounts #zgreater #zthan #zthose #zillustrated #zon #zthe #zfrontier. #zOn #za #zgraph,
#zeverything #zbeyond #zthe #zfrontier #zis #zunattainable.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zRemember
Difficulty: #z01 #zEasy
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-01
Topic: #zModeling #zOpportunity #zCost #zUsing #zthe #zProduction #zPossibilities #zFrontier
4. The #zunderlying #zreason #zproduction #zpossibilities #zfrontiers #zare #zlikely #zto #zbe
#zbowed #zout #z(rather #zthan #zlinear) #zis #zbecause
a. choices #zhave #zconsequences.
b. there #zare #zalways #zopportunity #zcosts.
c. some #zresources #zand #zpeople #zcan #zbe #zbetter #zused #zproducing #zone #zgood
#zrather #zthan #zanother.
d. there #zis #zalways #zsome #zlevel #zof #zunemployment.
Explanation: #zIf #zthe #zproduction #zpossibilities #zfrontier #zis #znot #za #zline #zbut #zis #zbowed #zout
#zaway #zfrom #zthe #zorigin, #zthen #zopportunity #zcost #zis #zincreasing. #zThe #zreason #zfor #zthis #zis
#zthat #zas #zwe #zadd #zmore #zresources #zto #zthe #zproduction #zof, #zfor #zexample, #zpizza, #zwe #zare
#zusing #zfewer #zresources #zto #zproduce #zsoda. #zCompounding #zthat #zproblem, #zat #zeach #zstage
#zas #zwe #ztake #zthe #zresources #zaway #zfrom #zsoda #zand #zput #zthem #zinto #zpizza, #zwe #zare
#zmoving #zworkers #zwho #zare #zworse #zat #zpizza #zproduction #zand #zbetter #zat #zsoda #zproduction
#zthan #zthose #zmoved #zin #zthe #zprevious #zstage. #zThis #zmeans #zthat #zthe #zincrease #zin #zpizza
#zproduction #zis #zdiminishing #zand #zthe #zloss #zin #zsoda #zproduction #zis #zincreasing. #zAn
#zeconomist #zwould #zcall #zthis #zan #zexample #zof #zincreasing #zopportunity #zcost. #z If #zthe
#zproduction #zpossibilities #zfrontier #zis #za #zstraight #zline #zthat #zis #znot #zbowed #zout #zaway
#zfrom #zthe #zorigin, #zthen #zopportunity #zcost #zis #zconstant.
AACSB: #zKnowledge #zApplication
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zRemember
Difficulty: #z01 #zEasy
#zGradeable: #zautomatic
#zLearning #zObjective: #z01-02
Topic: #zAttributes #zof #zthe #zProduction #zPossibilities #zFrontier
Page #z2
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
,5. Suppose you were modeling the impact of the introduction of computer automation
into manufacturing on a production possibilities frontier (PPF) with two manufactured
goods on their respective axes. It would be more likely that the result would be .
a) generalized growth with the PPF moving both up and to the right.
b) specialized growth with the PPF moving both up and to the right.
c) generalized growth with the PPF just moving up and not to the right.
d) specialized growth with the PPF just moving up and not to the right.
Explanation: Computer automation is a general improvement in technology so it would
improve all manufacturing. As a result, it would result in generalized growth and move
the PPF both up and to the right.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-03
Topic: Economic Growth
6. The optimization assumption suggests that people make
a. irrational decisions.
b. unpredictable decisions.
c. decisions to make themselves as well off as possible.
d. decisions without thinking very hard.
Explanation: The optimization assumption suggests that the person in question is trying
to maximize some objective. Consumers are assumed to be making decisions that
maximize their happiness subject to a scarce amount of money.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-01
Topic: Thinking Economically
Page #z3
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
, 7. Imagine #zan #zeconomist #zordering #zdonuts #zone-by-one. #zWhen #zdeciding #zhow #zmany
#zdonuts #zto #zorder #zthey #zwould #zpick #zthat #znumber #zwhere #zthe #zenjoyment #zof #zthe #z
equals #zthe #zenjoyment #zthey #zcould #zget #zfrom #zusing #zthe #zmoney #zon #zanother #zgood.
a. first #zdonut
b. last/marginal #zdonut
c. average/typical #zdonut
d. total #znumber #zof #zdonuts
Explanation: #zThe #zenjoyment #zof #zthe #zlast #zslice #zis #zthe #zmarginal #zbenefit #zof #zthat #zslice. #zIf
#zthis #zenjoyment #zis #zmore #zthan #zthe #zenjoyment #zfrom #zsome #zalternative, #zmore #zwill #zbe
#zconsumed.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
# z Learning #zObjective: #z01-04
#zTopic: #zThinking
#zEconomically
8. Of #zcourse, #zall #zindividual #zstudents #zare #zbetter #zoff #zif #zthey #zearn #zbetter #zgrades. #zIf
#z you #zwere #zto #zconclude #zthat #zall #zstudents #zwould #zbe #zbetter #zoff #zif #zeveryone #zreceived
#zan #zA, #z you #zwould
a. have #zfallen #zvictim #zto #zthe #zfallacy #zof #zscarcity.
b. be #zright.
c. have #zfallen #zvictim #zto #zthe #zfallacy #zof #zcomposition.
d. be #zmistaking #zcorrelation #zwith #zcausation.
Explanation: #zThe #zfallacy #zof #zcomposition #zis #zthe #zmistake #zin #zlogic #zthat #zsuggests #zthat
#zthe #ztotal #zeconomic #zimpact #zof #zsomething #zis #zalways #zand #zsimply #zequal #zto #zthe #zsum
#zof #zthe #zindividual #zparts.
AACSB: #zReflective #zThinking
#zAccessibility: #zKeyboard #zNavigation
#zBlooms: #zUnderstand
Difficulty: #z02 #zMedium
#zGradeable: #zautomatic
# z Learning #zObjective: #z01-04
#zTopic: #zThinking
#zEconomically
Page #z4
© #zMCGRAW #zHILL #zLLC. #zALL #zRIGHTS #zRESERVED. #zNO #zREPRODUCTION #zOR #zDISTRIBUTION #zWITHOUT
#zTHE #zPRIOR # z WRITTEN #zCONSENT #zOF #zMCGRAW #zHILL #z LLC.
