Page 1
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RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
,SOLUTION MANUAL FOR zx zx
Issues in Economics Today 10th Edition by Robert Guell
zx zx zx zx zx zx zx zx
Chapter 1-47 zx
Chapter 1 zx
End of Chapter Questions
zx zx zx
Quiz Yourself
zx
1. Scarcity implies that the allocation decision chosen by society can
zx zx zx zx zx zx zx zx zx
a) not make more of any one good. zx zx zx zx zx zx
b) always make more of any good. zx zx zx zx zx
c) typically make more of one good but at the expense of making less
zx zx zx zx zx zx zx zx zx zx zx zx zx
of another. zx
d) always make more of all goods simultaneously. Exp
zx zx zx zx zx zx zx
lanation: Scarcity implies that choices involve trade-offs.
zx zx zx zx zx zx
AACSB: Reflective Thinking Accessi
zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Understand
Difficulty: 02 Medium Grad zx zx zx
eable: automatic Learning O
zx zx zx
bjective: 01-01 zx
Topic: Economics and Opportunity Cost
zx zx zx zx
2. A production possibilities frontier is a simple model of
zx zx zx zx zx zx zx zx
a) allocating scarce inputs to the production of alternative outputs.zx zx zx zx zx zx zx zx
a) price and production/consumption in a market.
zx zx zx zx zx
b) the cost of producing goods. zx zx zx zx
c) the number of inputs required to produce varying levels of output. Explanati
zx zx zx zx zx zx zx zx zx zx z x
on: The production possibilities frontier shows the quantity of two goods that can be
zx zx zx zx zx zx zx zx zx zx zx zx zx zx
produced. It implies that scarcity requires that choices be made as to how to use reso
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
urces.
AACSB: Reflective Thinking Accessi
zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Understand
Difficulty: 02 Medium Grad zx zx zx
eable: automatic Learning O
zx zx zx
bjective: 01-01 zx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
zx zx zx zx zx zx zx zx
Page 2 zx
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RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
,3. The underlying reason that there are unattainable points on a production possibilitie
zx zx zx zx zx zx zx zx zx zx zx
s frontier is that there
zx zx zx zx
a. is government. zx
b. are always choices that must be made. zx zx zx zx zx zx
c. are scarce resources within a fixed level of technology.
zx zx zx zx zx zx zx zx
d. is unemployment of resources. zx zx zx
Explanation: The points outside the production possibilities frontier are unattainable. Thi
zx zx zx zx zx zx zx zx zx zx
s means that currently available resources and technology are insufficient to produce a
zx zx zx zx zx zx zx zx zx zx zx zx
mounts greater than those illustrated on the frontier. On a graph, everything beyond the
zx zx zx zx zx zx zx zx zx zx zx zx zx z
frontier is unattainable.
x zx zx
AACSB: Reflective Thinking Accessi zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Remember
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01-01 zx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
zx zx zx zx zx zx zx zx
4. The underlying reason production possibilities frontiers are likely to be bowed o
zx zx zx zx zx zx zx zx zx zx zx
ut (rather than linear) is because
zx zx zx zx zx
a. choices have consequences. zx zx
b. there are always opportunity costs. zx zx zx zx
c. some resources and people can be better used producing one good rathe
zx zx zx zx zx zx zx zx zx zx zx
r than another. zx zx
d. there is always some level of unemployment. zx zx zx zx zx zx
Explanation: If the production possibilities frontier is not a line but is bowed out away
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
from the origin, then opportunity cost is increasing. The reason for this is that as we ad
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
d more resources to the production of, for example, pizza, we are using fewer resources
zx zx zx zx zx zx zx zx zx zx zx zx zx zx
to produce soda. Compounding that problem, at each stage as we take the resources a
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
way from soda and put them into pizza, we are moving workers who are worse at pizz
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
a production and better at soda production than those moved in the previous stage. This
zx zx zx zx zx zx zx zx zx zx zx zx zx zx
means that the increase in pizza production is diminishing and the loss in soda producti
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
on is increasing. An economist would call this an example of increasing opportunity co
zx zx zx zx zx zx zx zx zx zx zx zx zx
st. If the production possibilities frontier is a straight line that is not bowed out away fr
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
om the origin, then opportunity cost is constant.
zx zx zx zx zx zx zx
AACSB: Knowledge Application Acc zx zx zx
essibility: Keyboard Navigation Bloo zx zx zx
ms: Remember zx
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01-02 zx
Topic: Attributes of the Production Possibilities Frontier
zx zx zx zx zx zx
Page 3 zx
©zxMCGRAWzxHILLzxLLC.zxALLzxRIGHTSzxRESERVED.zxNOzxREPRODUCTIONzxORzxDISTRIBUTIONzxWITHOUTzxTHEzxP
RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
, 5. Suppose you were modeling the impact of the introduction of computer automatio
zx zx zx zx zx zx zx zx zx zx zx
n into manufacturing on a production possibilities frontier (PPF) with two manufactur
zx zx zx zx zx zx zx zx zx zx zx
ed goods on their respective axes. It would be more likely that the result would be .
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
a) generalized growth with the PPF moving both up and to the right. zx zx zx zx zx zx zx zx zx zx zx
b) specialized growth with the PPF moving both up and to the right. zx zx zx zx zx zx zx zx zx zx zx
c) generalized growth with the PPF just moving up and not to the right. zx zx zx zx zx zx zx zx zx zx zx zx
d) specialized growth with the PPF just moving up and not to the right. Explana zx zx zx zx zx zx zx zx zx zx zx zx zx
tion: Computer automation is a general improvement in technology so it would impro
zx zx zx zx zx zx zx zx zx zx zx zx
ve all manufacturing. As a result, it would result in generalized growth and move the
zx zx zx zx zx zx zx zx zx zx zx zx zx zx z
xPPF both up and to the right.
zx zx zx zx zx zx
AACSB: Knowledge Application Acc zx zx zx
essibility: Keyboard Navigation Bloo zx zx zx
ms: Remember zx
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01- zx
03 Topic: Economic Growth
zx zx zx
6. The optimization assumption suggests that people make
zx zx zx zx zx zx
a. irrational decisions. zx
b. unpredictable decisions. zx
c. decisions to make themselves as well off as possible. zx zx zx zx zx zx zx zx
d. decisions without thinking very hard. zx zx zx zx
Explanation: The optimization assumption suggests that the person in question is trying
zx zx zx zx zx zx zx zx zx zx zx
to maximize some objective. Consumers are assumed to be making decisions that ma
zx zx zx zx zx zx zx zx zx zx zx zx zx
ximize their happiness subject to a scarce amount of money.
zx zx zx zx zx zx zx zx zx
AACSB: Reflective Thinking Accessi zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Remember
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01-01 zx
Topic: Thinking Economically zx zx
7. Imagine an economist ordering donuts one-by- zx zx zx zx zx
one. When deciding how many donuts to order they would pick that number where the
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
enjoyment of the zx zx zx
equals the enjoyment they could get from using the money on another good.
zx zx zx zx zx zx zx zx zx zx zx zx
a. first donut zx
b. last/marginal donut zx
c. average/typical donut zx
d. total number of donuts zx zx zx
Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this enjo
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
yment is more than the enjoyment from some alternative, more will be consumed.
zx zx zx zx zx zx zx zx zx zx zx zx
AACSB: Reflective Thinking zx zx
Page 4 zx
©zxMCGRAWzxHILLzxLLC.zxALLzxRIGHTSzxRESERVED.zxNOzxREPRODUCTIONzxORzxDISTRIBUTIONzxWITHOUTzxTHEzxP
RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
zx
©zxMCGRAWzxHILLzxLLC.zxALLzxRIGHTSzxRESERVED.zxNOzxREPRODUCTIONzxORzxDISTRIBUTIONzxWITHOUTzxTHEzxP
RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
,SOLUTION MANUAL FOR zx zx
Issues in Economics Today 10th Edition by Robert Guell
zx zx zx zx zx zx zx zx
Chapter 1-47 zx
Chapter 1 zx
End of Chapter Questions
zx zx zx
Quiz Yourself
zx
1. Scarcity implies that the allocation decision chosen by society can
zx zx zx zx zx zx zx zx zx
a) not make more of any one good. zx zx zx zx zx zx
b) always make more of any good. zx zx zx zx zx
c) typically make more of one good but at the expense of making less
zx zx zx zx zx zx zx zx zx zx zx zx zx
of another. zx
d) always make more of all goods simultaneously. Exp
zx zx zx zx zx zx zx
lanation: Scarcity implies that choices involve trade-offs.
zx zx zx zx zx zx
AACSB: Reflective Thinking Accessi
zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Understand
Difficulty: 02 Medium Grad zx zx zx
eable: automatic Learning O
zx zx zx
bjective: 01-01 zx
Topic: Economics and Opportunity Cost
zx zx zx zx
2. A production possibilities frontier is a simple model of
zx zx zx zx zx zx zx zx
a) allocating scarce inputs to the production of alternative outputs.zx zx zx zx zx zx zx zx
a) price and production/consumption in a market.
zx zx zx zx zx
b) the cost of producing goods. zx zx zx zx
c) the number of inputs required to produce varying levels of output. Explanati
zx zx zx zx zx zx zx zx zx zx z x
on: The production possibilities frontier shows the quantity of two goods that can be
zx zx zx zx zx zx zx zx zx zx zx zx zx zx
produced. It implies that scarcity requires that choices be made as to how to use reso
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
urces.
AACSB: Reflective Thinking Accessi
zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Understand
Difficulty: 02 Medium Grad zx zx zx
eable: automatic Learning O
zx zx zx
bjective: 01-01 zx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
zx zx zx zx zx zx zx zx
Page 2 zx
©zxMCGRAWzxHILLzxLLC.zxALLzxRIGHTSzxRESERVED.zxNOzxREPRODUCTIONzxORzxDISTRIBUTIONzxWITHOUTzxTHEzxP
RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
,3. The underlying reason that there are unattainable points on a production possibilitie
zx zx zx zx zx zx zx zx zx zx zx
s frontier is that there
zx zx zx zx
a. is government. zx
b. are always choices that must be made. zx zx zx zx zx zx
c. are scarce resources within a fixed level of technology.
zx zx zx zx zx zx zx zx
d. is unemployment of resources. zx zx zx
Explanation: The points outside the production possibilities frontier are unattainable. Thi
zx zx zx zx zx zx zx zx zx zx
s means that currently available resources and technology are insufficient to produce a
zx zx zx zx zx zx zx zx zx zx zx zx
mounts greater than those illustrated on the frontier. On a graph, everything beyond the
zx zx zx zx zx zx zx zx zx zx zx zx zx z
frontier is unattainable.
x zx zx
AACSB: Reflective Thinking Accessi zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Remember
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01-01 zx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
zx zx zx zx zx zx zx zx
4. The underlying reason production possibilities frontiers are likely to be bowed o
zx zx zx zx zx zx zx zx zx zx zx
ut (rather than linear) is because
zx zx zx zx zx
a. choices have consequences. zx zx
b. there are always opportunity costs. zx zx zx zx
c. some resources and people can be better used producing one good rathe
zx zx zx zx zx zx zx zx zx zx zx
r than another. zx zx
d. there is always some level of unemployment. zx zx zx zx zx zx
Explanation: If the production possibilities frontier is not a line but is bowed out away
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
from the origin, then opportunity cost is increasing. The reason for this is that as we ad
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
d more resources to the production of, for example, pizza, we are using fewer resources
zx zx zx zx zx zx zx zx zx zx zx zx zx zx
to produce soda. Compounding that problem, at each stage as we take the resources a
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
way from soda and put them into pizza, we are moving workers who are worse at pizz
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
a production and better at soda production than those moved in the previous stage. This
zx zx zx zx zx zx zx zx zx zx zx zx zx zx
means that the increase in pizza production is diminishing and the loss in soda producti
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
on is increasing. An economist would call this an example of increasing opportunity co
zx zx zx zx zx zx zx zx zx zx zx zx zx
st. If the production possibilities frontier is a straight line that is not bowed out away fr
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
om the origin, then opportunity cost is constant.
zx zx zx zx zx zx zx
AACSB: Knowledge Application Acc zx zx zx
essibility: Keyboard Navigation Bloo zx zx zx
ms: Remember zx
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01-02 zx
Topic: Attributes of the Production Possibilities Frontier
zx zx zx zx zx zx
Page 3 zx
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RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
, 5. Suppose you were modeling the impact of the introduction of computer automatio
zx zx zx zx zx zx zx zx zx zx zx
n into manufacturing on a production possibilities frontier (PPF) with two manufactur
zx zx zx zx zx zx zx zx zx zx zx
ed goods on their respective axes. It would be more likely that the result would be .
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
a) generalized growth with the PPF moving both up and to the right. zx zx zx zx zx zx zx zx zx zx zx
b) specialized growth with the PPF moving both up and to the right. zx zx zx zx zx zx zx zx zx zx zx
c) generalized growth with the PPF just moving up and not to the right. zx zx zx zx zx zx zx zx zx zx zx zx
d) specialized growth with the PPF just moving up and not to the right. Explana zx zx zx zx zx zx zx zx zx zx zx zx zx
tion: Computer automation is a general improvement in technology so it would impro
zx zx zx zx zx zx zx zx zx zx zx zx
ve all manufacturing. As a result, it would result in generalized growth and move the
zx zx zx zx zx zx zx zx zx zx zx zx zx zx z
xPPF both up and to the right.
zx zx zx zx zx zx
AACSB: Knowledge Application Acc zx zx zx
essibility: Keyboard Navigation Bloo zx zx zx
ms: Remember zx
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01- zx
03 Topic: Economic Growth
zx zx zx
6. The optimization assumption suggests that people make
zx zx zx zx zx zx
a. irrational decisions. zx
b. unpredictable decisions. zx
c. decisions to make themselves as well off as possible. zx zx zx zx zx zx zx zx
d. decisions without thinking very hard. zx zx zx zx
Explanation: The optimization assumption suggests that the person in question is trying
zx zx zx zx zx zx zx zx zx zx zx
to maximize some objective. Consumers are assumed to be making decisions that ma
zx zx zx zx zx zx zx zx zx zx zx zx zx
ximize their happiness subject to a scarce amount of money.
zx zx zx zx zx zx zx zx zx
AACSB: Reflective Thinking Accessi zx zx zx
bility: Keyboard Navigation Blooms:
zx zx zx zx
Remember
Difficulty: 01 Easy Gradeabl zx zx zx
e: automatic Learning Object
zx zx zx
ive: 01-01 zx
Topic: Thinking Economically zx zx
7. Imagine an economist ordering donuts one-by- zx zx zx zx zx
one. When deciding how many donuts to order they would pick that number where the
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
enjoyment of the zx zx zx
equals the enjoyment they could get from using the money on another good.
zx zx zx zx zx zx zx zx zx zx zx zx
a. first donut zx
b. last/marginal donut zx
c. average/typical donut zx
d. total number of donuts zx zx zx
Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this enjo
zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx zx
yment is more than the enjoyment from some alternative, more will be consumed.
zx zx zx zx zx zx zx zx zx zx zx zx
AACSB: Reflective Thinking zx zx
Page 4 zx
©zxMCGRAWzxHILLzxLLC.zxALLzxRIGHTSzxRESERVED.zxNOzxREPRODUCTIONzxORzxDISTRIBUTIONzxWITHOUTzxTHEzxP
RIORz x WRITTENzxCONSENTzxOFzxMCGRAWzxHILLzxLLC.
