Page 1 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss ss WRITTEN CONSENT OF MCGRAW HILL LLC.
s s s s s s s s s s s s
,SOLUTION MANUAL FOR s s s s
Issuesin Economics Today10th Edition by Robert Guell
s ss ss s ss ss ss ss
Chapter 1-47 ss
Chapter1 s
EndofChapterQuestionss s s
Quiz Yourself ss
1. Scarcity implies that the allocation decision chosen by society can
ss ss ss ss s s ss ss ss ss
a) not make more of any one good. ss ss ss ss ss ss
b) always make more of any good. ss ss ss ss ss
c) typically make more of one good but at the expense of making less ss ss ss ss ss ss ss ss ss ss ss ss
of another. ss ss
d) always make more of all goods simultaneously. ss ss ss ss ss ss
ss Explanation: Scarcityimplies that choices involve trade- ss s ss ss ss ss
ss offs.
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Understand
ss ss
Difficulty: 02 Medium ss ss
Gradeable: automatic
ss ss
LearningObjective:01-01
ss s s
Topic: Economics and Opportunity Cost
ss ss ss ss
2. A production possibilities frontier is a simple model of
ss ss ss ss ss ss ss ss
a) allocating scarce inputs to the production of alternative outputs. ss ss ss ss ss ss ss ss
a) price and production/consumption in a market. ss ss ss ss ss
b) the cost of producing goods. ss ss ss ss
c) the number of inputs required to produce varying levels of output.
ss ss ss ss ss ss ss ss ss ss
ss Explanation: The production possibilities frontier shows the quantity of two goods
ss ss ss ss ss ss ss ss ss ss
ss that can be produced. It implies that scarcity requires that choices be made as to how
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
ss to use resources.
ss ss
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Understand
ss ss
Difficulty: 02 Medium ss ss
Gradeable: automatic
ss ss
LearningObjective:01-01
ss s s
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
ss ss ss ss ss ss ss ss
Page 2 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss WRITTEN CONSENT OF MCGRAW HILL LLC.
ss s s s s s s s s s s s s
,3. The underlying reason that there are unattainable points on a production
ss ss ss ss ss ss ss ss ss ss
possibilities frontier is that there
ss ss ss ss ss
a. is government. ss
b. are always choices that must be made. ss ss ss s s ss ss
c. are scarce resources within a fixed level of technology.
ss s s ss ss ss ss ss ss
d. is unemployment of resources. ss ss ss
Explanation: The points outside the production possibilities frontier are unattainable.
ss ss ss ss ss ss ss ss ss
This means that currently available resources and technology are insufficient to
ss ss ss ss ss ss ss ss ss ss ss
produce amounts greater than those illustrated on the frontier. On a graph, everything
ss ss ss ss ss ss ss ss ss ss ss ss ss
beyond the frontier is unattainable.
ss ss ss ss ss
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
Gradeable: automatic
ss ss
LearningObjective:01-01
ss s s
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
ss ss ss ss ss ss ss ss
4. The underlying reason production possibilities frontiers are likely to be bowed
ss ss ss ss ss ss ss ss ss ss
out (rather than linear) is because
ss ss ss ss ss ss
a. choices have consequences. ss ss
b. there are always opportunity costs. ss ss ss ss
c. some resources and people can be better used producing one good ss ss ss ss ss ss ss ss ss ss
rather than another. ss ss ss
d. there is always some level of unemployment. ss ss ss ss ss ss
Explanation: If the production possibilities frontier is not a line but is bowed out away
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
from the origin, then opportunity cost is increasing. The reason for this is that
ss ss s s s s s s ss s s ss s s s s s s s s s s s s
as we add more resources to the production of, for example, pizza, we are using
ss s s ss ss ss ss ss ss ss ss ss ss ss ss ss
fewer resources to produce soda. Compounding that problem, at each stage as we take
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
the resources away from soda and put them into pizza, we are moving workers who
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
are worse at pizza production and better at soda production than those moved in the
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
previous stage. This means that the increase in pizza production is diminishing and
s s ss ss ss ss ss ss ss ss ss ss ss ss
the loss in soda production is increasing. An economist would call this an example of
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
increasing opportunity cost. If the production possibilities frontier is a straight line
ss ss ss ss ss ss ss ss ss ss ss ss
that is not bowed out away from the origin, then opportunity cost is constant.
ss s s ss ss ss ss ss ss ss ss ss ss ss ss
AACSB: Knowledge Application ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
Gradeable: automatic
ss ss
LearningObjective:01-02
ss s s
Topic: Attributes of the Production Possibilities Frontier
ss ss ss ss ss ss
Page 3 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss WRITTEN CONSENT OF MCGRAW HILL LLC.
ss s s s s s s s s s s s s
, 5. Suppose you were modeling the impact of the introduction of computer
ss ss ss ss ss ss ss ss ss ss
s s automation into manufacturing on a production possibilities frontier (PPF) with two
ss ss ss ss ss ss ss ss ss ss
ss manufactured goods on their respective axes. It would be more likely that the result ss ss ss ss ss ss ss ss ss ss ss ss ss
ss would be ss ss .
a) generalized growth with the PPF moving both up and to the right. ss ss ss ss ss ss ss ss s s ss ss
b) specialized growth with the PPF moving both up and to the right. ss ss ss ss ss ss ss ss s s ss ss
c) generalized growth with the PPF just moving up and not to the right. ss ss ss ss ss ss ss ss ss ss ss ss
d) specialized growth with the PPF just moving up and not to the right. ss ss ss ss ss ss ss ss ss ss ss ss
ss Explanation: Computer automation is a general improvement in technology so it
ss ss ss ss ss ss ss ss ss ss
ss would improve all manufacturing. As a result, it would result in generalized growth
ss ss ss ss ss ss ss ss ss ss ss ss
ss and move the PPF both up and to the right.
ss ss ss ss ss ss ss ss ss
AACSB: Knowledge Application ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
Gradeable: automatic
ss ss
LearningObjective:01-03
ss s s
Topic: Economic
ss ss
Growth
ss
6. The optimization assumption suggests that people make
ss ss ss ss ss ss
a. irrational decisions. ss
b. unpredictable decisions. ss
c. decisions to make themselves as well off as possible. ss ss ss ss ss ss ss ss
d. decisions without thinking very hard. ss ss ss ss
Explanation: The optimization assumption suggests that the person in question is trying
ss ss ss ss ss ss ss ss ss ss ss
to maximize some objective. Consumers are assumed to be making decisions that
ss ss ss ss ss ss ss ss ss ss ss ss
maximize their happiness subject to a scarce amount of money.
ss ss ss ss ss ss ss ss ss ss
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
s Gradeable: automatic
s ss
Learning Objective: 01-01
s s s ss
Topic: Thinking Economically
ss ss ss
7. Imagine an economist ordering donuts one-by-one. When deciding how many ss ss ss ss ss ss ss ss ss
donuts to order they would pick that number where the enjoyment of the
ss ss ss equals the ss ss ss ss ss ss ss ss ss ss ss ss
enjoyment they could get from using the money on another good.
ss ss ss ss ss ss ss ss ss ss ss
a. first donut ss
b. last/marginal donut ss
c. average/typical donut ss
d. total number of donuts ss ss ss
Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
enjoyment is more than the enjoyment from some alternative, more will be consumed.
ss ss ss ss ss ss ss ss ss ss ss ss ss
Page 4 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss WRITTEN CONSENT OF MCGRAW HILL LLC.
ss s s s s s s s s s s s s
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss ss WRITTEN CONSENT OF MCGRAW HILL LLC.
s s s s s s s s s s s s
,SOLUTION MANUAL FOR s s s s
Issuesin Economics Today10th Edition by Robert Guell
s ss ss s ss ss ss ss
Chapter 1-47 ss
Chapter1 s
EndofChapterQuestionss s s
Quiz Yourself ss
1. Scarcity implies that the allocation decision chosen by society can
ss ss ss ss s s ss ss ss ss
a) not make more of any one good. ss ss ss ss ss ss
b) always make more of any good. ss ss ss ss ss
c) typically make more of one good but at the expense of making less ss ss ss ss ss ss ss ss ss ss ss ss
of another. ss ss
d) always make more of all goods simultaneously. ss ss ss ss ss ss
ss Explanation: Scarcityimplies that choices involve trade- ss s ss ss ss ss
ss offs.
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Understand
ss ss
Difficulty: 02 Medium ss ss
Gradeable: automatic
ss ss
LearningObjective:01-01
ss s s
Topic: Economics and Opportunity Cost
ss ss ss ss
2. A production possibilities frontier is a simple model of
ss ss ss ss ss ss ss ss
a) allocating scarce inputs to the production of alternative outputs. ss ss ss ss ss ss ss ss
a) price and production/consumption in a market. ss ss ss ss ss
b) the cost of producing goods. ss ss ss ss
c) the number of inputs required to produce varying levels of output.
ss ss ss ss ss ss ss ss ss ss
ss Explanation: The production possibilities frontier shows the quantity of two goods
ss ss ss ss ss ss ss ss ss ss
ss that can be produced. It implies that scarcity requires that choices be made as to how
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
ss to use resources.
ss ss
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Understand
ss ss
Difficulty: 02 Medium ss ss
Gradeable: automatic
ss ss
LearningObjective:01-01
ss s s
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
ss ss ss ss ss ss ss ss
Page 2 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss WRITTEN CONSENT OF MCGRAW HILL LLC.
ss s s s s s s s s s s s s
,3. The underlying reason that there are unattainable points on a production
ss ss ss ss ss ss ss ss ss ss
possibilities frontier is that there
ss ss ss ss ss
a. is government. ss
b. are always choices that must be made. ss ss ss s s ss ss
c. are scarce resources within a fixed level of technology.
ss s s ss ss ss ss ss ss
d. is unemployment of resources. ss ss ss
Explanation: The points outside the production possibilities frontier are unattainable.
ss ss ss ss ss ss ss ss ss
This means that currently available resources and technology are insufficient to
ss ss ss ss ss ss ss ss ss ss ss
produce amounts greater than those illustrated on the frontier. On a graph, everything
ss ss ss ss ss ss ss ss ss ss ss ss ss
beyond the frontier is unattainable.
ss ss ss ss ss
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
Gradeable: automatic
ss ss
LearningObjective:01-01
ss s s
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
ss ss ss ss ss ss ss ss
4. The underlying reason production possibilities frontiers are likely to be bowed
ss ss ss ss ss ss ss ss ss ss
out (rather than linear) is because
ss ss ss ss ss ss
a. choices have consequences. ss ss
b. there are always opportunity costs. ss ss ss ss
c. some resources and people can be better used producing one good ss ss ss ss ss ss ss ss ss ss
rather than another. ss ss ss
d. there is always some level of unemployment. ss ss ss ss ss ss
Explanation: If the production possibilities frontier is not a line but is bowed out away
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
from the origin, then opportunity cost is increasing. The reason for this is that
ss ss s s s s s s ss s s ss s s s s s s s s s s s s
as we add more resources to the production of, for example, pizza, we are using
ss s s ss ss ss ss ss ss ss ss ss ss ss ss ss
fewer resources to produce soda. Compounding that problem, at each stage as we take
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
the resources away from soda and put them into pizza, we are moving workers who
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
are worse at pizza production and better at soda production than those moved in the
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
previous stage. This means that the increase in pizza production is diminishing and
s s ss ss ss ss ss ss ss ss ss ss ss ss
the loss in soda production is increasing. An economist would call this an example of
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
increasing opportunity cost. If the production possibilities frontier is a straight line
ss ss ss ss ss ss ss ss ss ss ss ss
that is not bowed out away from the origin, then opportunity cost is constant.
ss s s ss ss ss ss ss ss ss ss ss ss ss ss
AACSB: Knowledge Application ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
Gradeable: automatic
ss ss
LearningObjective:01-02
ss s s
Topic: Attributes of the Production Possibilities Frontier
ss ss ss ss ss ss
Page 3 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss WRITTEN CONSENT OF MCGRAW HILL LLC.
ss s s s s s s s s s s s s
, 5. Suppose you were modeling the impact of the introduction of computer
ss ss ss ss ss ss ss ss ss ss
s s automation into manufacturing on a production possibilities frontier (PPF) with two
ss ss ss ss ss ss ss ss ss ss
ss manufactured goods on their respective axes. It would be more likely that the result ss ss ss ss ss ss ss ss ss ss ss ss ss
ss would be ss ss .
a) generalized growth with the PPF moving both up and to the right. ss ss ss ss ss ss ss ss s s ss ss
b) specialized growth with the PPF moving both up and to the right. ss ss ss ss ss ss ss ss s s ss ss
c) generalized growth with the PPF just moving up and not to the right. ss ss ss ss ss ss ss ss ss ss ss ss
d) specialized growth with the PPF just moving up and not to the right. ss ss ss ss ss ss ss ss ss ss ss ss
ss Explanation: Computer automation is a general improvement in technology so it
ss ss ss ss ss ss ss ss ss ss
ss would improve all manufacturing. As a result, it would result in generalized growth
ss ss ss ss ss ss ss ss ss ss ss ss
ss and move the PPF both up and to the right.
ss ss ss ss ss ss ss ss ss
AACSB: Knowledge Application ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
Gradeable: automatic
ss ss
LearningObjective:01-03
ss s s
Topic: Economic
ss ss
Growth
ss
6. The optimization assumption suggests that people make
ss ss ss ss ss ss
a. irrational decisions. ss
b. unpredictable decisions. ss
c. decisions to make themselves as well off as possible. ss ss ss ss ss ss ss ss
d. decisions without thinking very hard. ss ss ss ss
Explanation: The optimization assumption suggests that the person in question is trying
ss ss ss ss ss ss ss ss ss ss ss
to maximize some objective. Consumers are assumed to be making decisions that
ss ss ss ss ss ss ss ss ss ss ss ss
maximize their happiness subject to a scarce amount of money.
ss ss ss ss ss ss ss ss ss ss
AACSB: Reflective Thinking ss ss
Accessibility: KeyboardNavigation
ss ss s
Blooms: Remember
ss ss
Difficulty: 01 Easy ss ss
s Gradeable: automatic
s ss
Learning Objective: 01-01
s s s ss
Topic: Thinking Economically
ss ss ss
7. Imagine an economist ordering donuts one-by-one. When deciding how many ss ss ss ss ss ss ss ss ss
donuts to order they would pick that number where the enjoyment of the
ss ss ss equals the ss ss ss ss ss ss ss ss ss ss ss ss
enjoyment they could get from using the money on another good.
ss ss ss ss ss ss ss ss ss ss ss
a. first donut ss
b. last/marginal donut ss
c. average/typical donut ss
d. total number of donuts ss ss ss
Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
enjoyment is more than the enjoyment from some alternative, more will be consumed.
ss ss ss ss ss ss ss ss ss ss ss ss ss
Page 4 ss
© MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION
ss ss s s s s ss s s ss ss ss s s
WITHOUT THE PRIOR
ss WRITTEN CONSENT OF MCGRAW HILL LLC.
ss s s s s s s s s s s s s
