Foundations of Business 7th Edition Solution Manual by William M. Pride, all chapter 1-47.

Solution Manual
Foundations of Business 7th Edition

by William M. Pride, All chapter 1 - 47

,Chapter 1 jk




End of Chapter Questions
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Quiz Yourself jk




1. Scarcity implies that the allocation decision chosen by society can
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a) not make more of any one good. jk jk jk jk jk jk



b) always make more of any good. jk jk jk jk jk



c) typically make more of one good but at the expense of making less of jk jk jk jk jk jk jk jk jk jk jk jk jk jk



another.
d) always make more of all goods simultaneously. Expla jk jk jk jk jk jk jk



nation: Scarcity implies that choices involve trade-offs.
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AACSB: Reflective Thinking Accessib jk jk jk



ility: Keyboard Navigation Blooms: Un
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derstand
Difficulty: 02 Medium Grade jk jk jk



able: automatic Learning Obje
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ctive: 01-01 jk



Topic: Economics and Opportunity Cost
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2. A production possibilities frontier is a simple model of
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a) allocating scarce inputs to the production of alternative outputs. jk jk jk jk jk jk jk jk



a) price and production/consumption in a market.jk jk jk jk jk



b) the cost of producing goods. jk jk jk jk



c) the number of inputs required to produce varying levels of output. Explanation:
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The production possibilities frontier shows the quantity of two goods that can be produce
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d. It implies that scarcity requires that choices be made as to how to use resources.
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AACSB: Reflective Thinking Accessib jk jk jk



ility: Keyboard Navigation Blooms: Un
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derstand
Difficulty: 02 Medium Grade jk jk jk



able: automatic Learning Obje
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ctive: 01-01 jk



Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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,3. The underlying reason that there are unattainable points on a production possibilities fr
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ontier is that there jk jk jk



a. is government. jk



b. are always choices that must be made. jk jk jk jk jk jk



c. are scarce resources within a fixed level of technology. jk jk jk jk jk jk jk jk



d. is unemployment of resources. jk jk jk



Explanation: The points outside the production possibilities frontier are unattainable. This jk jk jk jk jk jk jk jk jk jk jk



means that currently available resources and technology are insufficient to produce amount
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s greater than those illustrated on the frontier. On a graph, everything beyond the frontier is
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unattainable.

AACSB: Reflective Thinking Accessib jk jk jk



ility: Keyboard Navigation Blooms: Re
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member
Difficulty: 01 Easy Gradeable jk jk jk



: automatic Learning Objectiv
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e: 01-01 jk



Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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4. The underlying reason production possibilities frontiers are likely to be bowed out (r
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ather than linear) is because jk jk jk jk



a. choices have consequences. jk jk



b. there are always opportunity costs. jk jk jk jk



c. some resources and people can be better used producing one good rather t jk jk jk jk jk jk jk jk jk jk jk jk



han another. jk



d. there is always some level of unemployment. jk jk jk jk jk jk



Explanation: If the production possibilities frontier is not a line but is bowed out away from jk jk jk jk jk jk jk jk jk jk jk jk jk jk jk j



the origin, then opportunity cost is increasing. The reason for this is that as we add more res
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ources to the production of, for example, pizza, we are using fewer resources to produce so
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da. Compounding that problem, at each stage as we take the resources away from soda and
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put them into pizza, we are moving workers who are worse at pizza production and better at
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soda production than those moved in the previous stage. This means that the increase in piz
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za production is diminishing and the loss in soda production is increasing. An economist wo
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uld call this an example of increasing opportunity cost. If the production possibilities fronti
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er is a straight line that is not bowed out away from the origin, then opportunity cost is cons
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tant.

AACSB: Knowledge Application Acce jk jk jk



ssibility: Keyboard Navigation Blooms: jk jk jk



Remember
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Difficulty: 01 Easy Gradeable jk jk jk



: automatic Learning Objectiv
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e: 01-02 jk



Topic: Attributes of the Production Possibilities Frontier
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, 5. Suppose you were modeling the impact of the introduction of computer automation in
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to manufacturing on a production possibilities frontier (PPF) with two manufactured goo
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ds on their respective axes. It would be more likely that the result would be
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a) generalized growth with the PPF moving both up and to the right. jk jk jk jk jk jk jk jk jk jk jk



b) specialized growth with the PPF moving both up and to the right. jk jk jk jk jk jk jk jk jk jk jk



c) generalized growth with the PPF just moving up and not to the right. jk jk jk jk jk jk jk jk jk jk jk jk



d) specialized growth with the PPF just moving up and not to the right. Explanation jk jk jk jk jk jk jk jk jk jk jk jk jk



: Computer automation is a general improvement in technology so it would improve all m
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anufacturing. As a result, it would result in generalized growth and move the PPF both up
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and to the right.
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AACSB: Knowledge Application Acce jk jk jk



ssibility: Keyboard Navigation Blooms: jk jk jk



Remember
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Difficulty: 01 Easy Gradeable jk jk jk



: automatic Learning Objectiv
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e: 01- jk



03 Topic: Economic Growth
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6. The optimization assumption suggests that people make
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a. irrational decisions. jk



b. unpredictable decisions. jk



c. decisions to make themselves as well off as possible. jk jk jk jk jk jk jk jk



d. decisions without thinking very hard. jk jk jk jk



Explanation: The optimization assumption suggests that the person in question is trying to
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maximize some objective. Consumers are assumed to be making decisions that maximize
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their happiness subject to a scarce amount of money.
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AACSB: Reflective Thinking Accessib jk jk jk



ility: Keyboard Navigation Blooms: Re
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member
Difficulty: 01 Easy Gradeable jk jk jk



: automatic Learning Objectiv
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e: 01-01 jk



Topic: Thinking Economically jk jk