Solution Manual f
Foundations of Business 7th Edition
f f f f f
by William M. Pride, All chapter 1 - 47
f f f f f f f f f
,Chapter 1 f
End of Chapter Questions
f f f
Quiz fYourself
1. Scarcity fimplies fthat fthe fallocation fdecision fchosen fby fsociety fcan
a) not fmake fmore fof fany fone fgood.
b) always fmake fmore fof fany fgood.
c) typically fmake fmore fof fone fgood fbut fat fthe fexpense fof fmaking fless fof
fanother.
d) always fmake fmore fof fall fgoods fsimultaneously.
fExplanation: fScarcity fimplies fthat fchoices finvolve ftrade-offs.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fUnderstand
Difficulty: f02 fMedium
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fEconomics fand fOpportunity fCost
2. A fproduction fpossibilities ffrontier fis fa fsimple fmodel fof
a) allocating fscarce finputs fto fthe fproduction fof falternative foutputs.
a) price fand fproduction/consumption fin fa fmarket.
b) the fcost fof fproducing fgoods.
c) the fnumber fof finputs frequired fto fproduce fvarying flevels fof foutput.
f Explanation: fThe fproduction fpossibilities ffrontier fshows fthe fquantity fof ftwo fgoods fthat
fcan fbe fproduced. fIt fimplies fthat fscarcity frequires fthat fchoices fbe fmade fas fto fhow fto fuse
fresources.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fUnderstand
Difficulty: f02 fMedium
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fModeling fOpportunity fCost fUsing fthe fProduction fPossibilities fFrontier
,3. The funderlying freason fthat fthere fare funattainable fpoints fon fa fproduction fpossibilities
ffrontier fis fthat fthere
a. is fgovernment.
b. are falways fchoices fthat fmust fbe fmade.
c. are fscarce fresources fwithin fa ffixed flevel fof ftechnology.
d. is funemployment fof fresources.
Explanation: fThe fpoints foutside fthe fproduction fpossibilities ffrontier fare funattainable. fThis
fmeans fthat fcurrently favailable fresources fand ftechnology fare finsufficient fto fproduce
famounts fgreater fthan fthose fillustrated fon fthe ffrontier. fOn fa fgraph, feverything fbeyond fthe
ffrontier fis funattainable.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fModeling fOpportunity fCost fUsing fthe fProduction fPossibilities fFrontier
4. The funderlying freason fproduction fpossibilities ffrontiers fare flikely fto fbe fbowed fout
f(rather fthan flinear) fis fbecause
a. choices fhave fconsequences.
b. there fare falways fopportunity fcosts.
c. some fresources fand fpeople fcan fbe fbetter fused fproducing fone fgood frather
fthan fanother.
d. there fis falways fsome flevel fof funemployment.
Explanation: fIf fthe fproduction fpossibilities ffrontier fis fnot fa fline fbut fis fbowed fout faway
ffrom fthe forigin, fthen fopportunity fcost fis fincreasing. fThe freason ffor fthis fis fthat fas fwe fadd
fmore fresources fto fthe fproduction fof, ffor fexample, fpizza, fwe fare fusing ffewer fresources fto
fproduce fsoda. fCompounding fthat fproblem, fat feach fstage fas fwe ftake fthe fresources faway
ffrom fsoda fand fput fthem finto fpizza, fwe fare fmoving fworkers fwho fare fworse fat fpizza
fproduction fand fbetter fat fsoda fproduction fthan fthose fmoved fin fthe fprevious fstage. fThis
fmeans fthat fthe fincrease fin fpizza fproduction fis fdiminishing fand fthe floss fin fsoda fproduction
fis fincreasing. fAn feconomist fwould fcall fthis fan fexample fof fincreasing fopportunity fcost. fIf
fthe fproduction fpossibilities ffrontier fis fa fstraight fline fthat fis fnot fbowed fout faway ffrom fthe
forigin, fthen fopportunity fcost fis fconstant.
AACSB: fKnowledge fApplication
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-02
Topic: fAttributes fof fthe fProduction fPossibilities fFrontier
, 5. Suppose fyou fwere fmodeling fthe fimpact fof fthe fintroduction fof fcomputer fautomation
finto fmanufacturing fon fa fproduction fpossibilities ffrontier f(PPF) fwith ftwo fmanufactured
fgoods fon ftheir frespective faxes. fIt fwould fbe fmore flikely fthat fthe fresult fwould fbe f .
a) generalized fgrowth fwith fthe fPPF fmoving fboth fup fand fto fthe fright.
b) specialized fgrowth fwith fthe fPPF fmoving fboth fup fand fto fthe fright.
c) generalized fgrowth fwith fthe fPPF fjust fmoving fup fand fnot fto fthe fright.
d) specialized fgrowth fwith fthe fPPF fjust fmoving fup fand fnot fto fthe fright.
fExplanation: fComputer fautomation fis fa fgeneral fimprovement fin ftechnology fso fit fwould
fimprove fall fmanufacturing. fAs fa fresult, fit fwould fresult fin fgeneralized fgrowth fand fmove
fthe fPPF fboth fup fand fto fthe fright.
AACSB: fKnowledge fApplication
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-03
fTopic: fEconomic fGrowth
6. The foptimization fassumption fsuggests fthat fpeople fmake
a. irrational fdecisions.
b. unpredictable fdecisions.
c. decisions fto fmake fthemselves fas fwell foff fas fpossible.
d. decisions fwithout fthinking fvery fhard.
Explanation: fThe foptimization fassumption fsuggests fthat fthe fperson fin fquestion fis ftrying
fto fmaximize fsome fobjective. fConsumers fare fassumed fto fbe fmaking fdecisions fthat
fmaximize ftheir fhappiness fsubject fto fa fscarce famount fof fmoney.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fThinking fEconomically
Foundations of Business 7th Edition
f f f f f
by William M. Pride, All chapter 1 - 47
f f f f f f f f f
,Chapter 1 f
End of Chapter Questions
f f f
Quiz fYourself
1. Scarcity fimplies fthat fthe fallocation fdecision fchosen fby fsociety fcan
a) not fmake fmore fof fany fone fgood.
b) always fmake fmore fof fany fgood.
c) typically fmake fmore fof fone fgood fbut fat fthe fexpense fof fmaking fless fof
fanother.
d) always fmake fmore fof fall fgoods fsimultaneously.
fExplanation: fScarcity fimplies fthat fchoices finvolve ftrade-offs.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fUnderstand
Difficulty: f02 fMedium
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fEconomics fand fOpportunity fCost
2. A fproduction fpossibilities ffrontier fis fa fsimple fmodel fof
a) allocating fscarce finputs fto fthe fproduction fof falternative foutputs.
a) price fand fproduction/consumption fin fa fmarket.
b) the fcost fof fproducing fgoods.
c) the fnumber fof finputs frequired fto fproduce fvarying flevels fof foutput.
f Explanation: fThe fproduction fpossibilities ffrontier fshows fthe fquantity fof ftwo fgoods fthat
fcan fbe fproduced. fIt fimplies fthat fscarcity frequires fthat fchoices fbe fmade fas fto fhow fto fuse
fresources.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fUnderstand
Difficulty: f02 fMedium
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fModeling fOpportunity fCost fUsing fthe fProduction fPossibilities fFrontier
,3. The funderlying freason fthat fthere fare funattainable fpoints fon fa fproduction fpossibilities
ffrontier fis fthat fthere
a. is fgovernment.
b. are falways fchoices fthat fmust fbe fmade.
c. are fscarce fresources fwithin fa ffixed flevel fof ftechnology.
d. is funemployment fof fresources.
Explanation: fThe fpoints foutside fthe fproduction fpossibilities ffrontier fare funattainable. fThis
fmeans fthat fcurrently favailable fresources fand ftechnology fare finsufficient fto fproduce
famounts fgreater fthan fthose fillustrated fon fthe ffrontier. fOn fa fgraph, feverything fbeyond fthe
ffrontier fis funattainable.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fModeling fOpportunity fCost fUsing fthe fProduction fPossibilities fFrontier
4. The funderlying freason fproduction fpossibilities ffrontiers fare flikely fto fbe fbowed fout
f(rather fthan flinear) fis fbecause
a. choices fhave fconsequences.
b. there fare falways fopportunity fcosts.
c. some fresources fand fpeople fcan fbe fbetter fused fproducing fone fgood frather
fthan fanother.
d. there fis falways fsome flevel fof funemployment.
Explanation: fIf fthe fproduction fpossibilities ffrontier fis fnot fa fline fbut fis fbowed fout faway
ffrom fthe forigin, fthen fopportunity fcost fis fincreasing. fThe freason ffor fthis fis fthat fas fwe fadd
fmore fresources fto fthe fproduction fof, ffor fexample, fpizza, fwe fare fusing ffewer fresources fto
fproduce fsoda. fCompounding fthat fproblem, fat feach fstage fas fwe ftake fthe fresources faway
ffrom fsoda fand fput fthem finto fpizza, fwe fare fmoving fworkers fwho fare fworse fat fpizza
fproduction fand fbetter fat fsoda fproduction fthan fthose fmoved fin fthe fprevious fstage. fThis
fmeans fthat fthe fincrease fin fpizza fproduction fis fdiminishing fand fthe floss fin fsoda fproduction
fis fincreasing. fAn feconomist fwould fcall fthis fan fexample fof fincreasing fopportunity fcost. fIf
fthe fproduction fpossibilities ffrontier fis fa fstraight fline fthat fis fnot fbowed fout faway ffrom fthe
forigin, fthen fopportunity fcost fis fconstant.
AACSB: fKnowledge fApplication
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-02
Topic: fAttributes fof fthe fProduction fPossibilities fFrontier
, 5. Suppose fyou fwere fmodeling fthe fimpact fof fthe fintroduction fof fcomputer fautomation
finto fmanufacturing fon fa fproduction fpossibilities ffrontier f(PPF) fwith ftwo fmanufactured
fgoods fon ftheir frespective faxes. fIt fwould fbe fmore flikely fthat fthe fresult fwould fbe f .
a) generalized fgrowth fwith fthe fPPF fmoving fboth fup fand fto fthe fright.
b) specialized fgrowth fwith fthe fPPF fmoving fboth fup fand fto fthe fright.
c) generalized fgrowth fwith fthe fPPF fjust fmoving fup fand fnot fto fthe fright.
d) specialized fgrowth fwith fthe fPPF fjust fmoving fup fand fnot fto fthe fright.
fExplanation: fComputer fautomation fis fa fgeneral fimprovement fin ftechnology fso fit fwould
fimprove fall fmanufacturing. fAs fa fresult, fit fwould fresult fin fgeneralized fgrowth fand fmove
fthe fPPF fboth fup fand fto fthe fright.
AACSB: fKnowledge fApplication
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-03
fTopic: fEconomic fGrowth
6. The foptimization fassumption fsuggests fthat fpeople fmake
a. irrational fdecisions.
b. unpredictable fdecisions.
c. decisions fto fmake fthemselves fas fwell foff fas fpossible.
d. decisions fwithout fthinking fvery fhard.
Explanation: fThe foptimization fassumption fsuggests fthat fthe fperson fin fquestion fis ftrying
fto fmaximize fsome fobjective. fConsumers fare fassumed fto fbe fmaking fdecisions fthat
fmaximize ftheir fhappiness fsubject fto fa fscarce famount fof fmoney.
AACSB: fReflective fThinking
fAccessibility: fKeyboard fNavigation
fBlooms: fRemember
Difficulty: f01 fEasy
fGradeable: fautomatic
fLearning fObjective: f01-01
Topic: fThinking fEconomically
