Solution Manual for Foundations of Business 7th Edition by William M. Pride – All Chapters Included (1-47)

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Foundations of Business 7th Edition
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by William M. Pride, All chapter 1 - 47
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,Chapter 1 k




End of Chapter Questions
k k k




Quizk Yourself

1. Scarcityk impliesk thatk thek allocationk decisionk chosenk byk societyk can
a) notk makek morek ofk anyk onek good.
b) alwaysk makek morek ofk anyk good.
c) typicallyk makek morek ofk onek goodk butk atk thek expensek ofk makingkle
ssk ofk another.
d) alwaysk makek morek ofk allk goodsk simultaneously.kE
xplanation:k Scarcityk impliesk thatk choicesk involvek trade-
koffs.




AACSB:kReflectivekThinkingkAccesksi
bility:kKeyboardkNavigationkBloomks:k
Understand
Difficulty:k02kMediumkGrakd
eable:kautomatickLearningkO
bjective:k 01-01
Topic:k Economicsk andk Opportunityk Cost

2. Ak productionk possibilitiesk frontierk isk ak simplek modelk of
a) allocatingk scarcek inputsk tok thek productionk ofk alternativek outputs.
a) pricek andk production/consumptionk ink ak market.
b) thek costk ofk producingk goods.
c) theknumberkofkinputskrequiredktokproducekvaryingklevelskofkoutput.k Expklanation
:k Thek productionk possibilitiesk frontierk showsk thek quantityk ofk twok goodsk tkhatk cank b
ek produced.k Itk impliesk thatk scarcityk requiresk thatk choicesk bek madek ask tkok howk tok u
sek resources.

AACSB:kReflectivekThinkingkAccesksi
bility:kKeyboardkNavigationkBloomks:k
Understand
Difficulty:k02kMediumkGrakd
eable:kautomatickLearningkO
bjective:k 01-01
Topic:k Modelingk Opportunityk Costk Usingk thek Productionk Possibilitiesk Frontier

,3. Thek underlyingk reasonk thatk therek arek unattainablek pointsk onk ak productionk possikbi
litiesk frontierk isk thatk there
a. isk government.
b. arek alwaysk choicesk thatk mustk bek made.
c. arek scarcek resourcesk withink ak fixedk levelk ofk technology.
d. isk unemploymentk ofk resources.
Explanation:k Thek pointsk outsidek thek productionk possibilitiesk frontierk arek unattainable
.k Thisk meansk thatk currentlyk availablek resourcesk andk technologyk arek insufficientk tok prod
ucek amountsk greaterk thank thosek illustratedk onk thek frontier.k Onk ak graph,k everytk hingk be
yondk thek frontierk isk unattainable.

AACSB:kReflectivekThinkingkAccesksi
bility:kKeyboardkNavigationkBloomks:k
Remember
Difficulty:k01kEasykGradeakbl
e:kautomatickLearningkObkjec
tive:k 01-01
Topic:k Modelingk Opportunityk Costk Usingk thek Productionk Possibilitiesk Frontier

4. Thek underlyingk reasonk productionk possibilitiesk frontiersk arek likelyk tok bek bowke
dk outk (ratherk thank linear)k isk because
a. choicesk havek consequences.
b. therek arek alwaysk opportunityk costs.
c. somek resourcesk andk peoplek cank bek betterk usedk producingk onek goodkr
atherk thank another.
d. therek isk alwaysk somek levelk ofk unemployment.
Explanation:k Ifk thek productionk possibilitiesk frontierk isk notk ak linek butk isk bowedk outk aw
ayk fromk thek origin,k thenk opportunityk costk isk increasing.k Thek reasonk fork thisk iskthat
k ask wek addk morek resourcesk tok thek productionk of,k fork example,k pizza,k wek arekusing

k fewerk resourcesk tok producek soda.k Compoundingk thatk problem,k atk eachk stagekask we

k takek thek resourcesk awayk fromk sodak andk putk themk intok pizza,k wek arek movikngk wor

kersk whok arek worsek atk pizzak productionk andk betterk atk sodak productionk thank thosek mo
vedk ink thek previousk stage.k Thisk meansk thatk thek increasek ink pizzak productkionk isk dimi
nishingk andk thek lossk ink sodak productionk isk increasing.k Ank economistk wk ouldk callk thisk a
nk examplek ofk increasingk opportunityk cost.k Ifk thek productionk possibik litiesk frontierk isk a
k straightk linek thatk isk notk bowedk outk awayk fromk thek origin,k thenkopportunityk costk isk

constant.

AACSB:kKnowledgekApplicationkAkcc
essibility:kKeyboardkNavigationkBlkoo
ms:k Remember
Difficulty:k01kEasykGradeakbl
e:kautomatickLearningkObkjec
tive:k 01-02
Topic:k Attributesk ofk thek Productionk Possibilitiesk Frontier

, 5. Supposek youk werek modelingk thek impactk ofk thek introductionk ofk computerk autokm
ationk intok manufacturingk onk ak productionk possibilitiesk frontierk (PPF)k withk twok manu
facturedk goodsk onk theirk respectivek axes.k Itk wouldk bek morek likelyk thatk thek rk esultk wo
uldk bek .
a) generalizedk growthk withk thek PPFk movingk bothk upk andk tok thek right.
b) specializedk growthk withk thek PPFk movingk bothk upk andk tok thek right.
c) generalizedk growthk withk thek PPFk justk movingk upk andk notk tok thek right.
d) specializedk growthk withk thek PPFk justk movingk upk andk notk tok thek right.k Ek xpl
anation:k Computerk automationk isk ak generalk improvementk ink technologyk sok itkwouldk i
mprovek allk manufacturing.k Ask ak result,k itk wouldk resultk ink generalizedk grokwthk andk
movek thek PPFk bothk upk andk tok thek right.

AACSB:kKnowledgekApplicationkAkcc
essibility:kKeyboardkNavigationkBlkoo
ms:k Remember
Difficulty:k01kEasykGradeakbl
e:kautomatickLearningkObkjec
tive:k 01-
03kTopic:kEconomickGrowtk
h

6. Thek optimizationk assumptionk suggestsk thatk peoplek make
a. irrationalk decisions.
b. unpredictablek decisions.
c. decisionsk tok makek themselvesk ask wellk offk ask possible.
d. decisionsk withoutk thinkingk veryk hard.
Explanation:k Thek optimizationk assumptionk suggestsk thatk thek personk ink questionk isktry
ingk tok maximizek somek objective.k Consumersk arek assumedk tok bek makingk decisik onsk t
hatk maximizek theirk happinessk subjectk tok ak scarcek amountk ofk money.

AACSB:kReflectivekThinkingkAccesksi
bility:kKeyboardkNavigationkBloomks:k
Remember
Difficulty:k01kEasykGradeakbl
e:kautomatickLearningkObkjec
tive:k 01-01
Topic:k Thinkingk Economically