Solution Manual uc
Foundations of Business 7th Edition
uc uc uc uc uc
by William M. Pride, All chapter 1 - 47
uc uc uc uc uc uc uc uc uc
,Chapter1 uc
EndofChapterQuestions
uc uc uc
Quiz Yourselfuc
1. Scarcityimplies that the allocation decision chosen by society can
uc uc uc uc uc uc uc uc uc
a) not make more of any one good. uc uc uc uc uc uc
b) always make more of any good. uc uc uc uc uc
c) typically make more of one good but at the expense of making less of uc uc uc uc uc uc uc uc uc uc uc uc uc
another. uc
d) always make more of all goods simultaneously. uc uc uc uc uc uc
uc Explanation:Scarcityimpliesthatchoicesinvolve trade-offs. uc uc uc uc uc uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Understand
uc uc
Difficulty: 02 Medium uc uc
Gradeable: automatic
uc uc
LearningObjective:01-01
uc uc uc
Topic: Economics and Opportunity Cost
uc uc uc uc
2. A production possibilities frontier is a simple model of
uc uc uc uc uc uc uc uc
a) allocating scarce inputs to the production of alternative outputs. uc uc uc uc uc uc uc uc
a) price and production/consumption in a market. uc uc uc uc uc
b) the cost of producing goods. uc uc uc uc
c) the number of inputs required to produce varying levels of output. Explanation:
uc uc uc uc uc uc uc uc uc uc u c
The production possibilities frontier shows the quantityof two goods that can be produced. It
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
implies that scarcityrequires that choices be made as to how to use resources.
uc uc uc uc uc uc uc uc uc uc uc uc uc uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Understand
uc uc
Difficulty: 02 Medium uc uc
Gradeable: automatic
uc uc
LearningObjective:01-01
uc uc uc
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
uc uc uc uc uc uc uc uc
,3. The underlyingreason that there are unattainable points on a production possibilities
uc uc uc uc uc uc uc uc uc uc uc
frontier is that there
uc uc uc uc
a. is government. uc
b. are always choices that must be made. uc uc uc uc uc uc
c. are scarce resources within a fixed level of technology. uc uc uc uc uc uc uc uc
d. is unemployment of resources. uc uc uc
Explanation: The pointsoutside the production possibilities frontier areunattainable. This uc uc uc uc uc uc uc uc uc uc
means that currently available resources and technology are insufficient to produce amounts
uc uc uc uc uc uc uc uc uc uc uc uc
greater than those illustrated on the frontier. On a graph, everything beyond the frontier is
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
unattainable.
uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-01
uc
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
uc uc uc uc uc uc uc uc
4. The underlyingreason production possibilities frontiers are likelyto be bowed out
uc uc uc uc uc uc uc uc uc uc uc
(rather than linear) is because
uc uc uc uc uc
a. choices have consequences. uc uc
b. there are always opportunity costs. uc uc uc uc
c. someresources and people can be better used producing one good rather than uc uc uc uc uc uc uc uc uc uc uc uc
another. uc
d. there is always some level of unemployment. uc uc uc uc uc uc
Explanation: If the production possibilities frontier is not a line but is bowed out away from the uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
origin, then opportunity cost is increasing. The reason for this is that as we add more resources
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
to the production of, for example, pizza, we are using fewer resources to produce soda.
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
Compounding that problem, at each stage as we take the resources away from soda and put
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
them into pizza, we are moving workers who are worse at pizza production and better at soda
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
production than those moved in the previous stage. This means that the increase in pizza
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
production is diminishing and the loss in soda production is increasing. An economist would
uc uc uc uc uc uc uc uc uc uc uc uc uc uc
call this an example of increasing opportunity cost. If the production possibilities frontier is a
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
straight line that is not bowed out away from the origin, then opportunity cost is constant.
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
AACSB: Knowledge Application uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-02
uc
Topic: Attributes of the Production Possibilities Frontier
uc uc uc uc uc uc
, 5. Suppose you weremodelingthe impact of the introduction of computer automation into
uc uc uc uc uc uc uc uc uc uc uc uc
manufacturing on a production possibilities frontier (PPF) with two manufactured goods on
uc uc uc uc uc uc uc uc uc uc uc uc
their respective axes. It would be more likely that the result would be
uc uc uc . uc uc uc uc uc uc uc uc uc uc uc
a) generalized growth with the PPF moving both up and to the right. uc uc uc uc uc uc uc uc uc uc uc
b) specialized growth with the PPF moving both up and to the right. uc uc uc uc uc uc uc uc uc uc uc
c) generalized growth with the PPF just moving up and not to the right. uc uc uc uc uc uc uc uc uc uc uc uc
d) specialized growth with the PPF just moving up and not to the right. Explanation: uc uc uc uc uc uc uc uc uc uc uc uc uc
Computerautomation is a general improvement in technologyso it would improve all
uc uc uc uc uc uc uc uc uc uc uc uc uc
manufacturing. As a result, it would result in generalized growth and move the PPF both up
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
and to the right.
uc uc uc uc
AACSB: Knowledge Application uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-03 Topic: Economic
uc uc uc
Growth
uc
6. Theoptimization assumption suggests that people make
uc uc uc uc uc uc
a. irrational decisions. uc
b. unpredictable decisions. uc
c. decisions to make themselves as well off as possible. uc uc uc uc uc uc uc uc
d. decisions without thinking very hard. uc uc uc uc
Explanation: The optimization assumption suggests that the person in question is trying to
uc uc uc uc uc uc uc uc uc uc uc uc
maximize some objective. Consumers are assumed to be making decisions that maximize
uc uc uc uc uc uc uc uc uc uc uc uc
their happiness subject to a scarce amount of money.
uc uc uc uc uc uc uc uc uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-01
uc
Topic: Thinking Economically
uc uc
Foundations of Business 7th Edition
uc uc uc uc uc
by William M. Pride, All chapter 1 - 47
uc uc uc uc uc uc uc uc uc
,Chapter1 uc
EndofChapterQuestions
uc uc uc
Quiz Yourselfuc
1. Scarcityimplies that the allocation decision chosen by society can
uc uc uc uc uc uc uc uc uc
a) not make more of any one good. uc uc uc uc uc uc
b) always make more of any good. uc uc uc uc uc
c) typically make more of one good but at the expense of making less of uc uc uc uc uc uc uc uc uc uc uc uc uc
another. uc
d) always make more of all goods simultaneously. uc uc uc uc uc uc
uc Explanation:Scarcityimpliesthatchoicesinvolve trade-offs. uc uc uc uc uc uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Understand
uc uc
Difficulty: 02 Medium uc uc
Gradeable: automatic
uc uc
LearningObjective:01-01
uc uc uc
Topic: Economics and Opportunity Cost
uc uc uc uc
2. A production possibilities frontier is a simple model of
uc uc uc uc uc uc uc uc
a) allocating scarce inputs to the production of alternative outputs. uc uc uc uc uc uc uc uc
a) price and production/consumption in a market. uc uc uc uc uc
b) the cost of producing goods. uc uc uc uc
c) the number of inputs required to produce varying levels of output. Explanation:
uc uc uc uc uc uc uc uc uc uc u c
The production possibilities frontier shows the quantityof two goods that can be produced. It
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
implies that scarcityrequires that choices be made as to how to use resources.
uc uc uc uc uc uc uc uc uc uc uc uc uc uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Understand
uc uc
Difficulty: 02 Medium uc uc
Gradeable: automatic
uc uc
LearningObjective:01-01
uc uc uc
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
uc uc uc uc uc uc uc uc
,3. The underlyingreason that there are unattainable points on a production possibilities
uc uc uc uc uc uc uc uc uc uc uc
frontier is that there
uc uc uc uc
a. is government. uc
b. are always choices that must be made. uc uc uc uc uc uc
c. are scarce resources within a fixed level of technology. uc uc uc uc uc uc uc uc
d. is unemployment of resources. uc uc uc
Explanation: The pointsoutside the production possibilities frontier areunattainable. This uc uc uc uc uc uc uc uc uc uc
means that currently available resources and technology are insufficient to produce amounts
uc uc uc uc uc uc uc uc uc uc uc uc
greater than those illustrated on the frontier. On a graph, everything beyond the frontier is
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
unattainable.
uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-01
uc
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
uc uc uc uc uc uc uc uc
4. The underlyingreason production possibilities frontiers are likelyto be bowed out
uc uc uc uc uc uc uc uc uc uc uc
(rather than linear) is because
uc uc uc uc uc
a. choices have consequences. uc uc
b. there are always opportunity costs. uc uc uc uc
c. someresources and people can be better used producing one good rather than uc uc uc uc uc uc uc uc uc uc uc uc
another. uc
d. there is always some level of unemployment. uc uc uc uc uc uc
Explanation: If the production possibilities frontier is not a line but is bowed out away from the uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
origin, then opportunity cost is increasing. The reason for this is that as we add more resources
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
to the production of, for example, pizza, we are using fewer resources to produce soda.
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
Compounding that problem, at each stage as we take the resources away from soda and put
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
them into pizza, we are moving workers who are worse at pizza production and better at soda
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
production than those moved in the previous stage. This means that the increase in pizza
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
production is diminishing and the loss in soda production is increasing. An economist would
uc uc uc uc uc uc uc uc uc uc uc uc uc uc
call this an example of increasing opportunity cost. If the production possibilities frontier is a
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
straight line that is not bowed out away from the origin, then opportunity cost is constant.
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
AACSB: Knowledge Application uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-02
uc
Topic: Attributes of the Production Possibilities Frontier
uc uc uc uc uc uc
, 5. Suppose you weremodelingthe impact of the introduction of computer automation into
uc uc uc uc uc uc uc uc uc uc uc uc
manufacturing on a production possibilities frontier (PPF) with two manufactured goods on
uc uc uc uc uc uc uc uc uc uc uc uc
their respective axes. It would be more likely that the result would be
uc uc uc . uc uc uc uc uc uc uc uc uc uc uc
a) generalized growth with the PPF moving both up and to the right. uc uc uc uc uc uc uc uc uc uc uc
b) specialized growth with the PPF moving both up and to the right. uc uc uc uc uc uc uc uc uc uc uc
c) generalized growth with the PPF just moving up and not to the right. uc uc uc uc uc uc uc uc uc uc uc uc
d) specialized growth with the PPF just moving up and not to the right. Explanation: uc uc uc uc uc uc uc uc uc uc uc uc uc
Computerautomation is a general improvement in technologyso it would improve all
uc uc uc uc uc uc uc uc uc uc uc uc uc
manufacturing. As a result, it would result in generalized growth and move the PPF both up
uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc uc
and to the right.
uc uc uc uc
AACSB: Knowledge Application uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-03 Topic: Economic
uc uc uc
Growth
uc
6. Theoptimization assumption suggests that people make
uc uc uc uc uc uc
a. irrational decisions. uc
b. unpredictable decisions. uc
c. decisions to make themselves as well off as possible. uc uc uc uc uc uc uc uc
d. decisions without thinking very hard. uc uc uc uc
Explanation: The optimization assumption suggests that the person in question is trying to
uc uc uc uc uc uc uc uc uc uc uc uc
maximize some objective. Consumers are assumed to be making decisions that maximize
uc uc uc uc uc uc uc uc uc uc uc uc
their happiness subject to a scarce amount of money.
uc uc uc uc uc uc uc uc uc
AACSB: Reflective Thinking uc uc
Accessibility:KeyboardNavigation
uc uc uc
Blooms: Remember
uc uc
Difficulty: 01 Easy Gradeable: uc uc uc
automatic LearningObjective:
uc uc uc
01-01
uc
Topic: Thinking Economically
uc uc
