Solution Manual h
Foundations of Business 7th Edition
h h h h h
by William M. Pride, All chapter 1 - 47
h h h h h h h h h
,Chapter 1 h
EndhofhChapterhQuestions
QuizhYourself
1. Scarcityhimplieshthaththehallocationhdecisionhchosenhbyhsocietyhcan
a) nothmakehmorehofhanyhonehgood.
b) alwayshmakehmorehofhanyhgood.
c) typicallyhmakehmorehofhonehgoodhbuthaththehexpensehofhmakinghles
shofhanother.
d) alwayshmakehmorehofhallhgoodshsimultaneously.hExp
lanation:hScarcityhimplieshthathchoiceshinvolvehtrade-offs.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Understand
Difficulty:h02hMediumhGrad
eable:hautomatichLearninghO
bjective:h01-01
Topic:hEconomicshandhOpportunityhCost
2. Ahproductionhpossibilitieshfrontierhishahsimplehmodelhof
a) allocatinghscarcehinputshtohthehproductionhofhalternativehoutputs.
a) pricehandhproduction/consumptionhinhahmarket.
b) thehcosthofhproducinghgoods.
c) thehnumberhofhinputshrequiredhtohproducehvaryinghlevelshofhoutput.h Explanati
on:hThehproductionhpossibilitieshfrontierhshowshthehquantityhofhtwohgoodshthathcanhbe
hproduced.hIthimplieshthathscarcityhrequireshthathchoiceshbehmadehashtohhowhtohusehres
ources.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Understand
Difficulty:h02hMediumhGrad
eable:hautomatichLearninghO
bjective:h01-01
Topic:hModelinghOpportunityhCosthUsinghthehProductionhPossibilitieshFrontier
,3. Thehunderlyinghreasonhthaththereharehunattainablehpointshonhahproductionhpossibiliti
eshfrontierhishthaththere
a. ishgovernment.
b. arehalwayshchoiceshthathmusthbehmade.
c. arehscarcehresourceshwithinhahfixedhlevelhofhtechnology.
d. ishunemploymenthofhresources.
Explanation:hThehpointshoutsidehthehproductionhpossibilitieshfrontierharehunattainable.hTh
ishmeanshthathcurrentlyhavailablehresourceshandhtechnologyharehinsufficienthtohproduceha
mountshgreaterhthanhthosehillustratedhonhthehfrontier.hOnhahgraph,heverythinghbeyondhth
ehfrontierhishunattainable.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Remember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-01
Topic:hModelinghOpportunityhCosthUsinghthehProductionhPossibilitieshFrontier
4. Thehunderlyinghreasonhproductionhpossibilitieshfrontiersharehlikelyhtohbehbowedho
uth(ratherhthanhlinear)hishbecause
a. choiceshhavehconsequences.
b. thereharehalwayshopportunityhcosts.
c. somehresourceshandhpeoplehcanhbehbetterhusedhproducinghonehgoodhrat
herhthanhanother.
d. therehishalwayshsomehlevelhofhunemployment.
Explanation:hIfhthehproductionhpossibilitieshfrontierhishnothahlinehbuthishbowedhouthaway
hfromhthehorigin,hthenhopportunityhcosthishincreasing.hThehreasonhforhthishishthathashweha
ddhmorehresourceshtohthehproductionhof,hforhexample,hpizza,hweharehusinghfewerhresourc
eshtohproducehsoda.hCompoundinghthathproblem,hatheachhstagehashwehtakehthehresources
hawayhfromhsodahandhpuththemhintohpizza,hweharehmovinghworkershwhoharehworsehathpi
zzahproductionhandhbetterhathsodahproductionhthanhthosehmovedhinhthehprevioushstage.hT
hishmeanshthaththehincreasehinhpizzahproductionhishdiminishinghandhthehlosshinhsodahprod
uctionhishincreasing.hAnheconomisthwouldhcallhthishanhexamplehofhincreasinghopportunit
yhcost.hIfhthehproductionhpossibilitieshfrontierhishahstraighthlinehthathishnothbowedhouthaw
ayhfromhthehorigin,hthenhopportunityhcosthishconstant.
AACSB:hKnowledgehApplicationhAcc
essibility:hKeyboardhNavigationhBloo
ms:hRemember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-02
Topic:hAttributeshofhthehProductionhPossibilitieshFrontier
, 5. Supposehyouhwerehmodelinghthehimpacthofhthehintroductionhofhcomputerhautomati
onhintohmanufacturinghonhahproductionhpossibilitieshfrontierh(PPF)hwithhtwohmanufact
uredhgoodshonhtheirhrespectivehaxes.hIthwouldhbehmorehlikelyhthaththehresulthwouldhbe
h .
a) generalizedhgrowthhwithhthehPPFhmovinghbothhuphandhtohthehright.
b) specializedhgrowthhwithhthehPPFhmovinghbothhuphandhtohthehright.
c) generalizedhgrowthhwithhthehPPFhjusthmovinghuphandhnothtohthehright.
d) specializedhgrowthhwithhthehPPFhjusthmovinghuphandhnothtohthehright.hExplan
ation:hComputerhautomationhishahgeneralhimprovementhinhtechnologyhsohithwouldhimp
rovehallhmanufacturing.hAshahresult,hithwouldhresulthinhgeneralizedhgrowthhandhmoveht
hehPPFhbothhuphandhtohthehright.
AACSB:hKnowledgehApplicationhAcc
essibility:hKeyboardhNavigationhBloo
ms:hRemember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-
03hTopic:hEconomichGrowth
6. Thehoptimizationhassumptionhsuggestshthathpeoplehmake
a. irrationalhdecisions.
b. unpredictablehdecisions.
c. decisionshtohmakehthemselveshashwellhoffhashpossible.
d. decisionshwithouththinkinghveryhhard.
Explanation:hThehoptimizationhassumptionhsuggestshthaththehpersonhinhquestionhishtryin
ghtohmaximizehsomehobjective.hConsumersharehassumedhtohbehmakinghdecisionshthath
maximizehtheirhhappinesshsubjecthtohahscarcehamounthofhmoney.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Remember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-01
Topic:hThinkinghEconomically
Foundations of Business 7th Edition
h h h h h
by William M. Pride, All chapter 1 - 47
h h h h h h h h h
,Chapter 1 h
EndhofhChapterhQuestions
QuizhYourself
1. Scarcityhimplieshthaththehallocationhdecisionhchosenhbyhsocietyhcan
a) nothmakehmorehofhanyhonehgood.
b) alwayshmakehmorehofhanyhgood.
c) typicallyhmakehmorehofhonehgoodhbuthaththehexpensehofhmakinghles
shofhanother.
d) alwayshmakehmorehofhallhgoodshsimultaneously.hExp
lanation:hScarcityhimplieshthathchoiceshinvolvehtrade-offs.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Understand
Difficulty:h02hMediumhGrad
eable:hautomatichLearninghO
bjective:h01-01
Topic:hEconomicshandhOpportunityhCost
2. Ahproductionhpossibilitieshfrontierhishahsimplehmodelhof
a) allocatinghscarcehinputshtohthehproductionhofhalternativehoutputs.
a) pricehandhproduction/consumptionhinhahmarket.
b) thehcosthofhproducinghgoods.
c) thehnumberhofhinputshrequiredhtohproducehvaryinghlevelshofhoutput.h Explanati
on:hThehproductionhpossibilitieshfrontierhshowshthehquantityhofhtwohgoodshthathcanhbe
hproduced.hIthimplieshthathscarcityhrequireshthathchoiceshbehmadehashtohhowhtohusehres
ources.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Understand
Difficulty:h02hMediumhGrad
eable:hautomatichLearninghO
bjective:h01-01
Topic:hModelinghOpportunityhCosthUsinghthehProductionhPossibilitieshFrontier
,3. Thehunderlyinghreasonhthaththereharehunattainablehpointshonhahproductionhpossibiliti
eshfrontierhishthaththere
a. ishgovernment.
b. arehalwayshchoiceshthathmusthbehmade.
c. arehscarcehresourceshwithinhahfixedhlevelhofhtechnology.
d. ishunemploymenthofhresources.
Explanation:hThehpointshoutsidehthehproductionhpossibilitieshfrontierharehunattainable.hTh
ishmeanshthathcurrentlyhavailablehresourceshandhtechnologyharehinsufficienthtohproduceha
mountshgreaterhthanhthosehillustratedhonhthehfrontier.hOnhahgraph,heverythinghbeyondhth
ehfrontierhishunattainable.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Remember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-01
Topic:hModelinghOpportunityhCosthUsinghthehProductionhPossibilitieshFrontier
4. Thehunderlyinghreasonhproductionhpossibilitieshfrontiersharehlikelyhtohbehbowedho
uth(ratherhthanhlinear)hishbecause
a. choiceshhavehconsequences.
b. thereharehalwayshopportunityhcosts.
c. somehresourceshandhpeoplehcanhbehbetterhusedhproducinghonehgoodhrat
herhthanhanother.
d. therehishalwayshsomehlevelhofhunemployment.
Explanation:hIfhthehproductionhpossibilitieshfrontierhishnothahlinehbuthishbowedhouthaway
hfromhthehorigin,hthenhopportunityhcosthishincreasing.hThehreasonhforhthishishthathashweha
ddhmorehresourceshtohthehproductionhof,hforhexample,hpizza,hweharehusinghfewerhresourc
eshtohproducehsoda.hCompoundinghthathproblem,hatheachhstagehashwehtakehthehresources
hawayhfromhsodahandhpuththemhintohpizza,hweharehmovinghworkershwhoharehworsehathpi
zzahproductionhandhbetterhathsodahproductionhthanhthosehmovedhinhthehprevioushstage.hT
hishmeanshthaththehincreasehinhpizzahproductionhishdiminishinghandhthehlosshinhsodahprod
uctionhishincreasing.hAnheconomisthwouldhcallhthishanhexamplehofhincreasinghopportunit
yhcost.hIfhthehproductionhpossibilitieshfrontierhishahstraighthlinehthathishnothbowedhouthaw
ayhfromhthehorigin,hthenhopportunityhcosthishconstant.
AACSB:hKnowledgehApplicationhAcc
essibility:hKeyboardhNavigationhBloo
ms:hRemember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-02
Topic:hAttributeshofhthehProductionhPossibilitieshFrontier
, 5. Supposehyouhwerehmodelinghthehimpacthofhthehintroductionhofhcomputerhautomati
onhintohmanufacturinghonhahproductionhpossibilitieshfrontierh(PPF)hwithhtwohmanufact
uredhgoodshonhtheirhrespectivehaxes.hIthwouldhbehmorehlikelyhthaththehresulthwouldhbe
h .
a) generalizedhgrowthhwithhthehPPFhmovinghbothhuphandhtohthehright.
b) specializedhgrowthhwithhthehPPFhmovinghbothhuphandhtohthehright.
c) generalizedhgrowthhwithhthehPPFhjusthmovinghuphandhnothtohthehright.
d) specializedhgrowthhwithhthehPPFhjusthmovinghuphandhnothtohthehright.hExplan
ation:hComputerhautomationhishahgeneralhimprovementhinhtechnologyhsohithwouldhimp
rovehallhmanufacturing.hAshahresult,hithwouldhresulthinhgeneralizedhgrowthhandhmoveht
hehPPFhbothhuphandhtohthehright.
AACSB:hKnowledgehApplicationhAcc
essibility:hKeyboardhNavigationhBloo
ms:hRemember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-
03hTopic:hEconomichGrowth
6. Thehoptimizationhassumptionhsuggestshthathpeoplehmake
a. irrationalhdecisions.
b. unpredictablehdecisions.
c. decisionshtohmakehthemselveshashwellhoffhashpossible.
d. decisionshwithouththinkinghveryhhard.
Explanation:hThehoptimizationhassumptionhsuggestshthaththehpersonhinhquestionhishtryin
ghtohmaximizehsomehobjective.hConsumersharehassumedhtohbehmakinghdecisionshthath
maximizehtheirhhappinesshsubjecthtohahscarcehamounthofhmoney.
AACSB:hReflectivehThinkinghAccessi
bility:hKeyboardhNavigationhBlooms:h
Remember
Difficulty:h01hEasyhGradeabl
e:hautomatichLearninghObject
ive:h01-01
Topic:hThinkinghEconomically
