Solution Manual
Foundations of Business 7th Edition
by William M. Pride, All chapter 1 - 47
,Chapter 1 rx
End of Chapter Questions rx rx rx
Quiz Yourself rx
1. Scarcity implies that the allocation decision chosen by society can
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a) not make more of any one good. rx rx rx rx rx rx
b) always make more of any good. rx rx rx rx rx
c) typically make more of one good but at the expense of making less of rx rx rx rx rx rx rx rx rx rx rx rx rx
rx another.
d) always make more of all goods simultaneously. Ex rx rx rx rx rx rx rx
planation: Scarcity implies that choices involve trade-offs. rx rx rx rx rx rx
AACSB: Reflective Thinking Accessib rx rx rx
ility: Keyboard Navigation Blooms: U
rx rx rx rx
nderstand
Difficulty: 02 Medium Grad rx rx rx
eable: automatic Learning rx rx rx
Objective: 01-01 rx
Topic: Economics and Opportunity Cost
rx rx rx rx
2. A production possibilities frontier is a simple model of
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a) allocating scarce inputs to the production of alternative outputs. rx rx rx rx rx rx rx rx
a) price and production/consumption in a market. rx rx rx rx rx
b) the cost of producing goods. rx rx rx rx
c) the number of inputs required to produce varying levels of output. Explan
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ation: The production possibilities frontier shows the quantity of two goods that ca
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n be produced. It implies that scarcity requires that choices be made as to how to u
rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx
se resources.
rx
,AACSB: Reflective Thinking Accessib
rx rx rx
ility: Keyboard Navigation Blooms: U
rx rx rx rx
nderstand
Difficulty: 02 Medium Grad
rx rx rx
eable: automatic Learning
rx rx rx
Objective: 01-01 rx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
rx rx rx rx rx rx rx rx
, 3. The underlying reason that there are unattainable points on a production possib
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ilities frontier is that there
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a. is government. rx
b. are always choices that must be made. rx rx rx rx rx rx
c. are scarce resources within a fixed level of technology.
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d. is unemployment of resources. rx rx rx
Explanation: The points outside the production possibilities frontier are unattainable.
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This means that currently available resources and technology are insufficient to prod
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uce amounts greater than those illustrated on the frontier. On a graph, everything b
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eyond the frontier is unattainable.
rx rx rx rx
AACSB: Reflective Thinking Accessib rx rx rx
ility: Keyboard Navigation Blooms: R
rx rx rx rx
emember
Difficulty: 01 Easy Gradeable rx rx rx
: automatic Learning Objecti
rx rx rx
ve: 01-01 rx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
rx rx rx rx rx rx rx rx
4. The underlying reason production possibilities frontiers are likely to be bowed
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xout (rather than linear) is because
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a. choices have consequences. rx rx
b. there are always opportunity costs. rx rx rx rx
c. some resources and people can be better used producing one good rath
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er than another. rx rx
d. there is always some level of unemployment. rx rx rx rx rx rx
Explanation: If the production possibilities frontier is not a line but is bowed out away
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rx from the origin, then opportunity cost is increasing. The reason for this is that as we
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add more resources to the production of, for example, pizza, we are using fewer res
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ources to produce soda. Compounding that problem, at each stage as we take the r
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esources away from soda and put them into pizza, we are moving workers who are
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worse at pizza production and better at soda production than those moved in the pr
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evious stage. This means that the increase in pizza production is diminishing and the l
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Foundations of Business 7th Edition
by William M. Pride, All chapter 1 - 47
,Chapter 1 rx
End of Chapter Questions rx rx rx
Quiz Yourself rx
1. Scarcity implies that the allocation decision chosen by society can
rx rx rx rx rx rx rx rx rx
a) not make more of any one good. rx rx rx rx rx rx
b) always make more of any good. rx rx rx rx rx
c) typically make more of one good but at the expense of making less of rx rx rx rx rx rx rx rx rx rx rx rx rx
rx another.
d) always make more of all goods simultaneously. Ex rx rx rx rx rx rx rx
planation: Scarcity implies that choices involve trade-offs. rx rx rx rx rx rx
AACSB: Reflective Thinking Accessib rx rx rx
ility: Keyboard Navigation Blooms: U
rx rx rx rx
nderstand
Difficulty: 02 Medium Grad rx rx rx
eable: automatic Learning rx rx rx
Objective: 01-01 rx
Topic: Economics and Opportunity Cost
rx rx rx rx
2. A production possibilities frontier is a simple model of
rx rx rx rx rx rx rx rx
a) allocating scarce inputs to the production of alternative outputs. rx rx rx rx rx rx rx rx
a) price and production/consumption in a market. rx rx rx rx rx
b) the cost of producing goods. rx rx rx rx
c) the number of inputs required to produce varying levels of output. Explan
rx rx rx rx rx rx rx rx rx rx r x
ation: The production possibilities frontier shows the quantity of two goods that ca
rx rx rx rx rx rx rx rx rx rx rx rx
n be produced. It implies that scarcity requires that choices be made as to how to u
rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx
se resources.
rx
,AACSB: Reflective Thinking Accessib
rx rx rx
ility: Keyboard Navigation Blooms: U
rx rx rx rx
nderstand
Difficulty: 02 Medium Grad
rx rx rx
eable: automatic Learning
rx rx rx
Objective: 01-01 rx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
rx rx rx rx rx rx rx rx
, 3. The underlying reason that there are unattainable points on a production possib
rx rx rx rx rx rx rx rx rx rx rx
ilities frontier is that there
rx rx rx rx
a. is government. rx
b. are always choices that must be made. rx rx rx rx rx rx
c. are scarce resources within a fixed level of technology.
rx rx rx rx rx rx rx rx
d. is unemployment of resources. rx rx rx
Explanation: The points outside the production possibilities frontier are unattainable.
rx rx rx rx rx rx rx rx rx rx
This means that currently available resources and technology are insufficient to prod
rx rx rx rx rx rx rx rx rx rx rx
uce amounts greater than those illustrated on the frontier. On a graph, everything b
rx rx rx rx rx rx rx rx rx rx rx rx rx
eyond the frontier is unattainable.
rx rx rx rx
AACSB: Reflective Thinking Accessib rx rx rx
ility: Keyboard Navigation Blooms: R
rx rx rx rx
emember
Difficulty: 01 Easy Gradeable rx rx rx
: automatic Learning Objecti
rx rx rx
ve: 01-01 rx
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
rx rx rx rx rx rx rx rx
4. The underlying reason production possibilities frontiers are likely to be bowed
rx rx rx rx rx rx rx rx rx rx r
xout (rather than linear) is because
rx rx rx rx rx
a. choices have consequences. rx rx
b. there are always opportunity costs. rx rx rx rx
c. some resources and people can be better used producing one good rath
rx rx rx rx rx rx rx rx rx rx rx
er than another. rx rx
d. there is always some level of unemployment. rx rx rx rx rx rx
Explanation: If the production possibilities frontier is not a line but is bowed out away
rx rx rx rx rx rx rx rx rx rx rx rx rx rx
rx from the origin, then opportunity cost is increasing. The reason for this is that as we
rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx
add more resources to the production of, for example, pizza, we are using fewer res
rx rx rx rx rx rx rx rx rx rx rx rx rx rx
ources to produce soda. Compounding that problem, at each stage as we take the r
rx rx rx rx rx rx rx rx rx rx rx rx rx rx
esources away from soda and put them into pizza, we are moving workers who are
rx rx rx rx rx rx rx rx rx rx rx rx rx rx rx
worse at pizza production and better at soda production than those moved in the pr
rx rx rx rx rx rx rx rx rx rx rx rx rx rx
evious stage. This means that the increase in pizza production is diminishing and the l
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