,SOLUTION MANUAL FOR ss ss
Issues in Economics Today 10th Edition by Robert Guell
ss ss ss ss ss ss ss ss
Chapter ss1-47
Chapter1 s
End of Chapter Questions
ss ss ss
Quiz s s Yourself
1. Scarcity ssimplies s s that s s the s s allocation s s decision s s chosen s s by sssociety sscan
a) not s s make s s more s s of s s any ssone s s good.
b) always ss make ssmore ssof s s any ss good.
c) typically ssmake ssmore ssof ssone ssgood ssbut ssat ssthe ssexpense ssof ssmaking
ssless ssof ssanother.
d) always ssmake ssmore ssof ssall ssgoods
sssimultaneously. ssExplanation: ssScarcity ssimplies ssthat
sschoices ssinvolve sstrade- ssoffs.
AACSB: ssReflective ssThinking
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssUnderstand
Difficulty: ss02 ssMedium
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
01
Topic: s s Economics s s and ss Opportunity ssCost
2. A ssproduction s s possibilities s s frontier ssis ss a sssimple ss model s s of
a) allocating s s scarce s s inputs s s to s s the s s production s s of s s alternative s s outputs.
a) price ssand s s production/consumption s s in s s a s s market.
b) the s s cost s s of ss producing s s goods.
c) the ssnumber ssof ssinputs ssrequired ssto ssproduce ssvarying sslevels ssof ssoutput.
ssExplanation: ssThe ssproduction sspossibilities ssfrontier ssshows ssthe ssquantity ssof sstwo
ssgoods ssthat sscan ssbe ssproduced. ssIt ssimplies ssthat ssscarcity ssrequires ssthat sschoices ssbe
ssmade ssas ssto sshow ssto ssuse ssresources.
AACSB: ssReflective ssThinking
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssUnderstand
Difficulty: ss02 ssMedium
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
,01
Topic: ssModeling ssOpportunity ssCost s s Using ssthe s s Production s s Possibilities s s Frontier
, 3. The ssunderlying ssreason ssthat ssthere ssare ssunattainable sspoints sson ssa
ssproduction sspossibilities ssfrontier ssis ssthat ssthere
a. is s s government.
b. are ssalways s s choices s s that s s must s s be ss made.
c. are ssscarce s s resources s s within s s a ssfixed s s level s s of s s technology.
d. is ssunemployment ss of s s resources.
Explanation: ssThe sspoints ssoutside ssthe ssproduction sspossibilities ssfrontier ssare
ssunattainable. ssThis ssmeans ssthat sscurrently ssavailable ssresources ssand sstechnology ssare
ssinsufficient ssto ssproduce ssamounts ssgreater ssthan ssthose ssillustrated sson ssthe ssfrontier. ssOn
ssa ssgraph, sseverything ssbeyond ssthe ssfrontier ssis ssunattainable.
AACSB: ssReflective ssThinking
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssRemember
Difficulty: ss01 ssEasy
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
01
Topic: ssModeling ssOpportunity ssCost s s Using ssthe s s Production s s Possibilities s s Frontier
4. The ssunderlying ssreason ssproduction sspossibilities ssfrontiers ssare sslikely ssto ssbe
ssbowed ssout ss(rather ssthan sslinear) ssis ssbecause
a. choices s s have ssconsequences.
b. there s s are s s always s s opportunity sscosts.
c. some ssresources ssand sspeople sscan ssbe ssbetter ssused ssproducing ssone
ssgood ssrather ssthan ssanother.
d. there ssis s s always s s some sslevel s s of s s unemployment.
Explanation: ssIf ssthe ssproduction sspossibilities ssfrontier ssis ssnot ssa ssline ssbut ssis ssbowed ssout
ssaway ssfrom ssthe s s origin, s s then s s opportunity sscost s s is ssincreasing. s s The s s reason s s for
s s this s s is s s that ssas s s we ssadd ssmore ssresources ssto ssthe ssproduction ssof, ssfor ssexample,
sspizza, sswe ssare ssusing ssfewer ssresources ssto ssproduce sssoda. ssCompounding ssthat ssproblem,
ssat sseach ssstage ssas sswe sstake ssthe ssresources ssaway ssfrom sssoda ssand ssput ssthem ssinto sspizza,
sswe ssare ssmoving ssworkers sswho ssare ssworse ssat sspizza ssproduction ssand ssbetter ssat sssoda
ssproduction ssthan ssthose ssmoved ssin ssthe s s previous ssstage. ssThis ssmeans ssthat ssthe ssincrease
ssin sspizza ssproduction ssis ssdiminishing ssand ssthe ssloss ssin sssoda ssproduction ssis ssincreasing.
ssAn sseconomist sswould sscall ssthis ssan ssexample ssof ssincreasing ssopportunity sscost. ssIf ssthe
ssproduction sspossibilities ssfrontier ssis ssa ssstraight ssline ssthat s s is ssnot ssbowed ssout ssaway
ssfrom ssthe ssorigin, ssthen ssopportunity sscost ssis ssconstant.
AACSB: ssKnowledge ssApplication
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssRemember
Difficulty: ss01 ssEasy
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
02
Topic: s s Attributes ss of ss the ssProduction s s Possibilities ss Frontier
Issues in Economics Today 10th Edition by Robert Guell
ss ss ss ss ss ss ss ss
Chapter ss1-47
Chapter1 s
End of Chapter Questions
ss ss ss
Quiz s s Yourself
1. Scarcity ssimplies s s that s s the s s allocation s s decision s s chosen s s by sssociety sscan
a) not s s make s s more s s of s s any ssone s s good.
b) always ss make ssmore ssof s s any ss good.
c) typically ssmake ssmore ssof ssone ssgood ssbut ssat ssthe ssexpense ssof ssmaking
ssless ssof ssanother.
d) always ssmake ssmore ssof ssall ssgoods
sssimultaneously. ssExplanation: ssScarcity ssimplies ssthat
sschoices ssinvolve sstrade- ssoffs.
AACSB: ssReflective ssThinking
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssUnderstand
Difficulty: ss02 ssMedium
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
01
Topic: s s Economics s s and ss Opportunity ssCost
2. A ssproduction s s possibilities s s frontier ssis ss a sssimple ss model s s of
a) allocating s s scarce s s inputs s s to s s the s s production s s of s s alternative s s outputs.
a) price ssand s s production/consumption s s in s s a s s market.
b) the s s cost s s of ss producing s s goods.
c) the ssnumber ssof ssinputs ssrequired ssto ssproduce ssvarying sslevels ssof ssoutput.
ssExplanation: ssThe ssproduction sspossibilities ssfrontier ssshows ssthe ssquantity ssof sstwo
ssgoods ssthat sscan ssbe ssproduced. ssIt ssimplies ssthat ssscarcity ssrequires ssthat sschoices ssbe
ssmade ssas ssto sshow ssto ssuse ssresources.
AACSB: ssReflective ssThinking
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssUnderstand
Difficulty: ss02 ssMedium
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
,01
Topic: ssModeling ssOpportunity ssCost s s Using ssthe s s Production s s Possibilities s s Frontier
, 3. The ssunderlying ssreason ssthat ssthere ssare ssunattainable sspoints sson ssa
ssproduction sspossibilities ssfrontier ssis ssthat ssthere
a. is s s government.
b. are ssalways s s choices s s that s s must s s be ss made.
c. are ssscarce s s resources s s within s s a ssfixed s s level s s of s s technology.
d. is ssunemployment ss of s s resources.
Explanation: ssThe sspoints ssoutside ssthe ssproduction sspossibilities ssfrontier ssare
ssunattainable. ssThis ssmeans ssthat sscurrently ssavailable ssresources ssand sstechnology ssare
ssinsufficient ssto ssproduce ssamounts ssgreater ssthan ssthose ssillustrated sson ssthe ssfrontier. ssOn
ssa ssgraph, sseverything ssbeyond ssthe ssfrontier ssis ssunattainable.
AACSB: ssReflective ssThinking
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssRemember
Difficulty: ss01 ssEasy
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
01
Topic: ssModeling ssOpportunity ssCost s s Using ssthe s s Production s s Possibilities s s Frontier
4. The ssunderlying ssreason ssproduction sspossibilities ssfrontiers ssare sslikely ssto ssbe
ssbowed ssout ss(rather ssthan sslinear) ssis ssbecause
a. choices s s have ssconsequences.
b. there s s are s s always s s opportunity sscosts.
c. some ssresources ssand sspeople sscan ssbe ssbetter ssused ssproducing ssone
ssgood ssrather ssthan ssanother.
d. there ssis s s always s s some sslevel s s of s s unemployment.
Explanation: ssIf ssthe ssproduction sspossibilities ssfrontier ssis ssnot ssa ssline ssbut ssis ssbowed ssout
ssaway ssfrom ssthe s s origin, s s then s s opportunity sscost s s is ssincreasing. s s The s s reason s s for
s s this s s is s s that ssas s s we ssadd ssmore ssresources ssto ssthe ssproduction ssof, ssfor ssexample,
sspizza, sswe ssare ssusing ssfewer ssresources ssto ssproduce sssoda. ssCompounding ssthat ssproblem,
ssat sseach ssstage ssas sswe sstake ssthe ssresources ssaway ssfrom sssoda ssand ssput ssthem ssinto sspizza,
sswe ssare ssmoving ssworkers sswho ssare ssworse ssat sspizza ssproduction ssand ssbetter ssat sssoda
ssproduction ssthan ssthose ssmoved ssin ssthe s s previous ssstage. ssThis ssmeans ssthat ssthe ssincrease
ssin sspizza ssproduction ssis ssdiminishing ssand ssthe ssloss ssin sssoda ssproduction ssis ssincreasing.
ssAn sseconomist sswould sscall ssthis ssan ssexample ssof ssincreasing ssopportunity sscost. ssIf ssthe
ssproduction sspossibilities ssfrontier ssis ssa ssstraight ssline ssthat s s is ssnot ssbowed ssout ssaway
ssfrom ssthe ssorigin, ssthen ssopportunity sscost ssis ssconstant.
AACSB: ssKnowledge ssApplication
ssAccessibility: ssKeyboard ssNavigation
ssBlooms: ssRemember
Difficulty: ss01 ssEasy
ssGradeable: ssautomatic
ssLearningsObjective:ss01-
02
Topic: s s Attributes ss of ss the ssProduction s s Possibilities ss Frontier
