Solution Manual v
Foundations of Business 7th Edition
v v v v v
by William M. Pride, All chapter 1 - 47
v v v v v v v v v
,Chapter 1 v
End of Chapter Questions
v v v
Quiz vYourself
1. Scarcity vimplies vthat vthe vallocation vdecision vchosen vby vsociety vcan
a) not vmake vmore vof vany vone vgood.
b) always vmake vmore vof vany vgood.
c) typically vmake vmore vof vone vgood vbut vat vthe vexpense vof vmaking
vless vof vanother.
d) always vmake vmore vof vall vgoods vsimultaneously.
vExplanation: vScarcity vimplies vthat vchoices vinvolve vtrade-
offs.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vUnderstand
Difficulty: v02 vMedium
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vEconomics vand vOpportunity vCost
2. A vproduction vpossibilities vfrontier vis va vsimple vmodel vof
a) allocating vscarce vinputs vto vthe vproduction vof valternative voutputs.
a) price vand vproduction/consumption vin va vmarket.
b) the vcost vof vproducing vgoods.
c) the vnumber vof vinputs vrequired vto vproduce vvarying vlevels vof voutput.
v Explanation: vThe vproduction vpossibilities vfrontier vshows vthe vquantity vof vtwo vgoods
vthat vcan vbe vproduced. vIt vimplies vthat vscarcity vrequires vthat vchoices vbe vmade vas vto
vhow vto vuse vresources.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vUnderstand
Difficulty: v02 vMedium
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vModeling vOpportunity vCost vUsing vthe vProduction vPossibilities vFrontier
,3. The vunderlying vreason vthat vthere vare vunattainable vpoints von va vproduction
vpossibilities vfrontier vis vthat vthere
a. is vgovernment.
b. are valways vchoices vthat vmust vbe vmade.
c. are vscarce vresources vwithin va vfixed vlevel vof vtechnology.
d. is vunemployment vof vresources.
Explanation: vThe vpoints voutside vthe vproduction vpossibilities vfrontier vare vunattainable.
vThis vmeans vthat vcurrently vavailable vresources vand vtechnology vare vinsufficient vto
vproduce vamounts vgreater vthan vthose villustrated von vthe vfrontier. vOn va vgraph, veverything
vbeyond vthe vfrontier vis vunattainable.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vModeling vOpportunity vCost vUsing vthe vProduction vPossibilities vFrontier
4. The vunderlying vreason vproduction vpossibilities vfrontiers vare vlikely vto vbe vbowed
vout v(rather vthan vlinear) vis vbecause
a. choices vhave vconsequences.
b. there vare valways vopportunity vcosts.
c. some vresources vand vpeople vcan vbe vbetter vused vproducing vone vgood
vrather vthan vanother.
d. there vis valways vsome vlevel vof vunemployment.
Explanation: vIf vthe vproduction vpossibilities vfrontier vis vnot va vline vbut vis vbowed vout
vaway vfrom vthe vorigin, vthen vopportunity vcost vis vincreasing. vThe vreason vfor vthis vis vthat
vas vwe vadd vmore vresources vto vthe vproduction vof, vfor vexample, vpizza, vwe vare vusing
vfewer vresources vto vproduce vsoda. vCompounding vthat vproblem, vat veach vstage vas vwe
vtake vthe vresources vaway vfrom vsoda vand vput vthem vinto vpizza, vwe vare vmoving vworkers
vwho vare vworse vat vpizza vproduction vand vbetter vat vsoda vproduction vthan vthose vmoved vin
vthe vprevious vstage. vThis vmeans vthat vthe vincrease vin vpizza vproduction vis vdiminishing
vand vthe vloss vin vsoda vproduction vis vincreasing. vAn veconomist vwould vcall vthis van
vexample vof vincreasing vopportunity vcost. vIf vthe vproduction vpossibilities vfrontier vis va
vstraight vline vthat vis vnot vbowed vout vaway vfrom vthe vorigin, vthen vopportunity vcost vis
vconstant.
AACSB: vKnowledge vApplication
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-02
Topic: vAttributes vof vthe vProduction vPossibilities vFrontier
, 5. Suppose vyou vwere vmodeling vthe vimpact vof vthe vintroduction vof vcomputer
vautomation vinto vmanufacturing von va vproduction vpossibilities vfrontier v(PPF) vwith vtwo
vmanufactured vgoods von vtheir vrespective vaxes. vIt vwould vbe vmore vlikely vthat vthe
vresult vwould vbe v .
a) generalized vgrowth vwith vthe vPPF vmoving vboth vup vand vto vthe vright.
b) specialized vgrowth vwith vthe vPPF vmoving vboth vup vand vto vthe vright.
c) generalized vgrowth vwith vthe vPPF vjust vmoving vup vand vnot vto vthe vright.
d) specialized vgrowth vwith vthe vPPF vjust vmoving vup vand vnot vto vthe vright.
vExplanation: vComputer vautomation vis va vgeneral vimprovement vin vtechnology vso vit
vwould vimprove vall vmanufacturing. vAs va vresult, vit vwould vresult vin vgeneralized vgrowth
vand vmove vthe vPPF vboth vup vand vto vthe vright.
AACSB: vKnowledge vApplication
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-03
vTopic: vEconomic vGrowth
6. The voptimization vassumption vsuggests vthat vpeople vmake
a. irrational vdecisions.
b. unpredictable vdecisions.
c. decisions vto vmake vthemselves vas vwell voff vas vpossible.
d. decisions vwithout vthinking vvery vhard.
Explanation: vThe voptimization vassumption vsuggests vthat vthe vperson vin vquestion vis
vtrying vto vmaximize vsome vobjective. vConsumers vare vassumed vto vbe vmaking vdecisions
vthat vmaximize vtheir vhappiness vsubject vto va vscarce vamount vof vmoney.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vThinking vEconomically
Foundations of Business 7th Edition
v v v v v
by William M. Pride, All chapter 1 - 47
v v v v v v v v v
,Chapter 1 v
End of Chapter Questions
v v v
Quiz vYourself
1. Scarcity vimplies vthat vthe vallocation vdecision vchosen vby vsociety vcan
a) not vmake vmore vof vany vone vgood.
b) always vmake vmore vof vany vgood.
c) typically vmake vmore vof vone vgood vbut vat vthe vexpense vof vmaking
vless vof vanother.
d) always vmake vmore vof vall vgoods vsimultaneously.
vExplanation: vScarcity vimplies vthat vchoices vinvolve vtrade-
offs.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vUnderstand
Difficulty: v02 vMedium
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vEconomics vand vOpportunity vCost
2. A vproduction vpossibilities vfrontier vis va vsimple vmodel vof
a) allocating vscarce vinputs vto vthe vproduction vof valternative voutputs.
a) price vand vproduction/consumption vin va vmarket.
b) the vcost vof vproducing vgoods.
c) the vnumber vof vinputs vrequired vto vproduce vvarying vlevels vof voutput.
v Explanation: vThe vproduction vpossibilities vfrontier vshows vthe vquantity vof vtwo vgoods
vthat vcan vbe vproduced. vIt vimplies vthat vscarcity vrequires vthat vchoices vbe vmade vas vto
vhow vto vuse vresources.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vUnderstand
Difficulty: v02 vMedium
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vModeling vOpportunity vCost vUsing vthe vProduction vPossibilities vFrontier
,3. The vunderlying vreason vthat vthere vare vunattainable vpoints von va vproduction
vpossibilities vfrontier vis vthat vthere
a. is vgovernment.
b. are valways vchoices vthat vmust vbe vmade.
c. are vscarce vresources vwithin va vfixed vlevel vof vtechnology.
d. is vunemployment vof vresources.
Explanation: vThe vpoints voutside vthe vproduction vpossibilities vfrontier vare vunattainable.
vThis vmeans vthat vcurrently vavailable vresources vand vtechnology vare vinsufficient vto
vproduce vamounts vgreater vthan vthose villustrated von vthe vfrontier. vOn va vgraph, veverything
vbeyond vthe vfrontier vis vunattainable.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vModeling vOpportunity vCost vUsing vthe vProduction vPossibilities vFrontier
4. The vunderlying vreason vproduction vpossibilities vfrontiers vare vlikely vto vbe vbowed
vout v(rather vthan vlinear) vis vbecause
a. choices vhave vconsequences.
b. there vare valways vopportunity vcosts.
c. some vresources vand vpeople vcan vbe vbetter vused vproducing vone vgood
vrather vthan vanother.
d. there vis valways vsome vlevel vof vunemployment.
Explanation: vIf vthe vproduction vpossibilities vfrontier vis vnot va vline vbut vis vbowed vout
vaway vfrom vthe vorigin, vthen vopportunity vcost vis vincreasing. vThe vreason vfor vthis vis vthat
vas vwe vadd vmore vresources vto vthe vproduction vof, vfor vexample, vpizza, vwe vare vusing
vfewer vresources vto vproduce vsoda. vCompounding vthat vproblem, vat veach vstage vas vwe
vtake vthe vresources vaway vfrom vsoda vand vput vthem vinto vpizza, vwe vare vmoving vworkers
vwho vare vworse vat vpizza vproduction vand vbetter vat vsoda vproduction vthan vthose vmoved vin
vthe vprevious vstage. vThis vmeans vthat vthe vincrease vin vpizza vproduction vis vdiminishing
vand vthe vloss vin vsoda vproduction vis vincreasing. vAn veconomist vwould vcall vthis van
vexample vof vincreasing vopportunity vcost. vIf vthe vproduction vpossibilities vfrontier vis va
vstraight vline vthat vis vnot vbowed vout vaway vfrom vthe vorigin, vthen vopportunity vcost vis
vconstant.
AACSB: vKnowledge vApplication
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-02
Topic: vAttributes vof vthe vProduction vPossibilities vFrontier
, 5. Suppose vyou vwere vmodeling vthe vimpact vof vthe vintroduction vof vcomputer
vautomation vinto vmanufacturing von va vproduction vpossibilities vfrontier v(PPF) vwith vtwo
vmanufactured vgoods von vtheir vrespective vaxes. vIt vwould vbe vmore vlikely vthat vthe
vresult vwould vbe v .
a) generalized vgrowth vwith vthe vPPF vmoving vboth vup vand vto vthe vright.
b) specialized vgrowth vwith vthe vPPF vmoving vboth vup vand vto vthe vright.
c) generalized vgrowth vwith vthe vPPF vjust vmoving vup vand vnot vto vthe vright.
d) specialized vgrowth vwith vthe vPPF vjust vmoving vup vand vnot vto vthe vright.
vExplanation: vComputer vautomation vis va vgeneral vimprovement vin vtechnology vso vit
vwould vimprove vall vmanufacturing. vAs va vresult, vit vwould vresult vin vgeneralized vgrowth
vand vmove vthe vPPF vboth vup vand vto vthe vright.
AACSB: vKnowledge vApplication
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-03
vTopic: vEconomic vGrowth
6. The voptimization vassumption vsuggests vthat vpeople vmake
a. irrational vdecisions.
b. unpredictable vdecisions.
c. decisions vto vmake vthemselves vas vwell voff vas vpossible.
d. decisions vwithout vthinking vvery vhard.
Explanation: vThe voptimization vassumption vsuggests vthat vthe vperson vin vquestion vis
vtrying vto vmaximize vsome vobjective. vConsumers vare vassumed vto vbe vmaking vdecisions
vthat vmaximize vtheir vhappiness vsubject vto va vscarce vamount vof vmoney.
AACSB: vReflective vThinking
vAccessibility: vKeyboard vNavigation
vBlooms: vRemember
Difficulty: v01 vEasy
vGradeable: vautomatic
vLearning vObjective: v01-01
Topic: vThinking vEconomically
