SOLUTION MANUAL FOR k k
Issues in Economics Today 10th Edition by Robert Guell
k k k k k k k k
Chapterk 1-47
Chapter 1 k
End of Chapter Questions
k k k
QuizkYourself
1. Scarcityk impliesk that k thek allocationk decisionk chosenk byk societyk can
a) not k makek morek of k anyk onek good.
b) alwaysk makek morek of k anyk good.
c) typicallykmakekmorekof konekgoodkbutkatkthekexpensekof kmakingklesskof k
another.
d) alwaysk makek morek of k allk goodsk simultaneously.k Expla
nation:k Scarcitykimpliesk that k choicesk involvek trade-offs.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Grade
able:k automatick LearningkObj
ective:k01-01
Topic:k Economicsk and k Opportunityk Cost
2. Ak productionk possibilitiesk frontierk isk ak simplek modelk of
a) allocatingkscarcekinputsktokthekproductionkof kalternativekoutputs.
a) pricek and k production/consumptionk ink ak market.
b) thek cost k of k producingk goods.
c) thek numberk of k inputsk required k tok producek varyingk levelsk of koutput.k Explanation:k
Thek productionk possibilitiesk frontierk showsk thek quantitykofktwok goodskthat kcank bekproduc
ed.k It k impliesk that k scarcityk requiresk that k choicesk bek madek ask tok how k tok usek resources.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Grade
able:k automatick LearningkObj
ective:k01-01
Topic:k Modelingk Opportunityk Cost k Usingk thek Productionk Possibilitiesk Frontier
Pagek 1
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
,3. Thek underlyingk reasonk that k therekarek unattainablek pointskonk akproductionkpossibilitiesk f
rontierk isk that k there
a. isk government.
b. arek alwaysk choicesk that k must k bek made.
c. arekscarcekresourceskwithinkakfixedklevelkof ktechnology.
d. isk unemployment k of k resources.
Explanation:k Thek pointsk outsidek thek productionk possibilitiesk frontierk arek unattainable.k Thisk
meansk that k currentlyk availablek resourcesk and k technologyk arek insufficient k tokproducek amoun
tsk greaterk thank thosek illustrated konkthekfrontier.k Onk akgraph,k everythingk beyondkthekfrontierk i
sk unattainable.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k R
emember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-01
Topic:k Modelingk Opportunityk Cost k Usingk thek Productionk Possibilitiesk Frontier
4. Thek underlyingk reasonk productionk possibilitiesk frontiersk arek likelyktok bek bowedkoutk(
ratherk thank linear)k isk because
a. choicesk havek consequences.
b. therek arek alwaysk opportunityk costs.
c. somekresourceskandkpeoplekcankbekbetterkusedkproducingkonekgoodkratherk
thankanother.
d. therek isk alwaysk somek levelk of k unemployment.
Explanation:k If k thek productionk possibilitiesk frontierk isk not k ak linek but k isk bowed k out k awayk fro
mk thek origin,k thenk opportunityk cost kisk increasing.k Thek reasonk fork thisk isk thatk askwekaddk morek
resourcesk tok thek productionk of,k fork example,k pizza,k wekarek usingk fewerk resourcesk tok produce
k soda.k Compoundingk that kproblem,k at k eachk stagek askwektakekthekresourcesk awayk fromk sodaka
nd k put k themkintok pizza,k wek arek movingk workersk whok arek worsek at kpizzak productionk andk bett
erk at k sodak productionk thank thosek moved kink thek previousk stage.kThisk meansk that kthekincreasek i
nk pizzak productionk isk diminishingk and k thek lossk inksodakproductionk isk increasing.k Ank econom
ist k would k callk thisk ank examplek of kincreasingk opportunityk cost.k Ifk thekproductionk possibilities
k frontierk isk ak straight k linek that kisk not kbowedkoutk awayk fromk thekorigin,k thenk opportunityk cost k
isk constant.
AACSB:k Knowledgek Applicationk Acc
essibility:kKeyboard kNavigationk Bloom
s:k Remember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-02
Topic:k Attributesk of k thek Productionk Possibilitiesk Frontier
Pagek 2
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
,5. Supposek youk werek modelingk thek impact kofk thekintroductionkof kcomputerkautomationk i
ntok manufacturingk onk ak productionk possibilitiesk frontierk (PPF)k withk twokmanufactured kgo
odsk onk theirk respectivek axes.k It k would k bek morek likelyk that k thek result k would k bek .
a) generalizedkgrowthkwithkthekPPFkmovingkbothkupkandktokthekright.
b) specialized k growthk withk thek PPFk movingk bothk upk and k tok thek right.
c) generalized k growthk withk thek PPFk just k movingk upk and k not k tok thek right.
d) specialized k growthk withk thek PPFkjust kmovingk upk andknot ktokthek right.kExplanation
:k Computerk automationk isk ak generalk improvement k ink technologyk sok it k would k improvek allk
manufacturing.k Ask ak result,k it k would kresult k inkgeneralized k growthkandkmovek thekPPFkboth
k upk and k tok thek right.
AACSB:k Knowledgek Applicationk Acc
essibility:kKeyboard kNavigationk Bloom
s:k Remember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-
03k Topic:k Economick Growth
6. Thek optimizationk assumptionk suggestsk that k peoplek make
a. irrationalk decisions.
b. unpredictablek decisions.
c. decisionsktokmakekthemselveskaskwellkoff kaskpossible.
d. decisionsk without k thinkingk veryk hard.
Explanation:k Thek optimizationk assumptionk suggestsk that k thekpersonkink questionkisk tryingk to
k maximizek somek objective.k Consumersk arek assumed k tok bek makingk decisionsk that k maximiz
ek theirk happinessk subject k tok ak scarcek amount k of k money.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k R
emember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-01
Topic:k Thinkingk Economically
7. Imaginek ank economist k orderingk donutsk one-by-
one.k Whenk decidingk howkmanyk donutsk tokorderk theykwould kpickk that knumberk wherek thek enjo
yment k of k thek
equalsk thek enjoyment k theyk could k get k fromk usingk thek moneyk onk anotherk good.
a. first k donut
b. last/marginalkdonut
c. average/typicalk donut
d. totalk numberk of k donuts
Explanation:k Thek enjoyment k of k thek last kslicek isk thekmarginalk benefit k ofk that k slice.k If k thisk enjoym
ent k isk morek thank thek enjoyment k fromk somek alternative,k morek willk bek consumed.
AACSB:k Reflectivek Thinking
Pagek 3
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
, Accessibility:kKeyboard kNavigationk Bl
ooms:k Understand
Difficulty:k 02k Mediumk Gradea
ble:k automatick Learningk Objec
tive:k 01-
04k Topic:kThinkingkEconomica
lly
8. Of k course,k allk individualk studentsk arekbetterk offk ifktheykearnk betterkgrades.kIfkyouk werek t
ok concludek that k allk studentsk would k bek betterk off k if k everyonek received k ank A,k youk would
a. havek fallenk victimk tok thek fallacyk of k scarcity.
b. bek right.
c. havekfallenkvictimktokthekfallacykof kcomposition.
d. bek mistakingk correlationk withk causation.
Explanation:k Thek fallacyk of k compositionk isk thek mistakekink logick thatksuggestsk that kthektotalk e
conomick impact k of k somethingk isk alwaysk and k simplyk equalk tok thek sumk ofk thekindividualk parts
.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Gradea
ble:k automatick Learningk Objec
tive:k 01-
04k Topic:kThinkingkEconomica
lly
9. Imaginek youk werek tok conclude,kafterk carefullyk examiningk datakandk usingk properk evalua
tionk techniques,k that k ak taxk credit kforkattendingk collegek benefitsk lowk incomek earnersk morek th
ank ak taxk deductionk(of kequalk totalk costktokthekgovernment)k would.kYouk would khavekengagedk
ink analysisk tok reachk that k conclusion.
a. negative
b. positive
c. normative
d. creative
Explanation:kEconomists,kand ksocialkscientistskinkgeneral,kdistinguishkviewskof k―thekwayk th
ingskare‖ kfromk ―thek waykthingskshould kbe,‖kcallingkthek formerk positivekanalysisk and kthek latte
rk normativek analysis.k Positivek analysisk isk ak formk of k analysisk that k seeksk tokunderstandk thek wa
yk thingsk arek and k whyktheyk arek that kway.kNormativek analysisk isk ak formk ofkanalysisk that k seeksk
tok understand k thek wayk thingsk should k be.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Gradea
ble:k automatick Learningk Objec
tive:k 01-
04k Topic:kThinkingkEconomica
Pagek 4
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
Issues in Economics Today 10th Edition by Robert Guell
k k k k k k k k
Chapterk 1-47
Chapter 1 k
End of Chapter Questions
k k k
QuizkYourself
1. Scarcityk impliesk that k thek allocationk decisionk chosenk byk societyk can
a) not k makek morek of k anyk onek good.
b) alwaysk makek morek of k anyk good.
c) typicallykmakekmorekof konekgoodkbutkatkthekexpensekof kmakingklesskof k
another.
d) alwaysk makek morek of k allk goodsk simultaneously.k Expla
nation:k Scarcitykimpliesk that k choicesk involvek trade-offs.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Grade
able:k automatick LearningkObj
ective:k01-01
Topic:k Economicsk and k Opportunityk Cost
2. Ak productionk possibilitiesk frontierk isk ak simplek modelk of
a) allocatingkscarcekinputsktokthekproductionkof kalternativekoutputs.
a) pricek and k production/consumptionk ink ak market.
b) thek cost k of k producingk goods.
c) thek numberk of k inputsk required k tok producek varyingk levelsk of koutput.k Explanation:k
Thek productionk possibilitiesk frontierk showsk thek quantitykofktwok goodskthat kcank bekproduc
ed.k It k impliesk that k scarcityk requiresk that k choicesk bek madek ask tok how k tok usek resources.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Grade
able:k automatick LearningkObj
ective:k01-01
Topic:k Modelingk Opportunityk Cost k Usingk thek Productionk Possibilitiesk Frontier
Pagek 1
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
,3. Thek underlyingk reasonk that k therekarek unattainablek pointskonk akproductionkpossibilitiesk f
rontierk isk that k there
a. isk government.
b. arek alwaysk choicesk that k must k bek made.
c. arekscarcekresourceskwithinkakfixedklevelkof ktechnology.
d. isk unemployment k of k resources.
Explanation:k Thek pointsk outsidek thek productionk possibilitiesk frontierk arek unattainable.k Thisk
meansk that k currentlyk availablek resourcesk and k technologyk arek insufficient k tokproducek amoun
tsk greaterk thank thosek illustrated konkthekfrontier.k Onk akgraph,k everythingk beyondkthekfrontierk i
sk unattainable.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k R
emember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-01
Topic:k Modelingk Opportunityk Cost k Usingk thek Productionk Possibilitiesk Frontier
4. Thek underlyingk reasonk productionk possibilitiesk frontiersk arek likelyktok bek bowedkoutk(
ratherk thank linear)k isk because
a. choicesk havek consequences.
b. therek arek alwaysk opportunityk costs.
c. somekresourceskandkpeoplekcankbekbetterkusedkproducingkonekgoodkratherk
thankanother.
d. therek isk alwaysk somek levelk of k unemployment.
Explanation:k If k thek productionk possibilitiesk frontierk isk not k ak linek but k isk bowed k out k awayk fro
mk thek origin,k thenk opportunityk cost kisk increasing.k Thek reasonk fork thisk isk thatk askwekaddk morek
resourcesk tok thek productionk of,k fork example,k pizza,k wekarek usingk fewerk resourcesk tok produce
k soda.k Compoundingk that kproblem,k at k eachk stagek askwektakekthekresourcesk awayk fromk sodaka
nd k put k themkintok pizza,k wek arek movingk workersk whok arek worsek at kpizzak productionk andk bett
erk at k sodak productionk thank thosek moved kink thek previousk stage.kThisk meansk that kthekincreasek i
nk pizzak productionk isk diminishingk and k thek lossk inksodakproductionk isk increasing.k Ank econom
ist k would k callk thisk ank examplek of kincreasingk opportunityk cost.k Ifk thekproductionk possibilities
k frontierk isk ak straight k linek that kisk not kbowedkoutk awayk fromk thekorigin,k thenk opportunityk cost k
isk constant.
AACSB:k Knowledgek Applicationk Acc
essibility:kKeyboard kNavigationk Bloom
s:k Remember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-02
Topic:k Attributesk of k thek Productionk Possibilitiesk Frontier
Pagek 2
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
,5. Supposek youk werek modelingk thek impact kofk thekintroductionkof kcomputerkautomationk i
ntok manufacturingk onk ak productionk possibilitiesk frontierk (PPF)k withk twokmanufactured kgo
odsk onk theirk respectivek axes.k It k would k bek morek likelyk that k thek result k would k bek .
a) generalizedkgrowthkwithkthekPPFkmovingkbothkupkandktokthekright.
b) specialized k growthk withk thek PPFk movingk bothk upk and k tok thek right.
c) generalized k growthk withk thek PPFk just k movingk upk and k not k tok thek right.
d) specialized k growthk withk thek PPFkjust kmovingk upk andknot ktokthek right.kExplanation
:k Computerk automationk isk ak generalk improvement k ink technologyk sok it k would k improvek allk
manufacturing.k Ask ak result,k it k would kresult k inkgeneralized k growthkandkmovek thekPPFkboth
k upk and k tok thek right.
AACSB:k Knowledgek Applicationk Acc
essibility:kKeyboard kNavigationk Bloom
s:k Remember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-
03k Topic:k Economick Growth
6. Thek optimizationk assumptionk suggestsk that k peoplek make
a. irrationalk decisions.
b. unpredictablek decisions.
c. decisionsktokmakekthemselveskaskwellkoff kaskpossible.
d. decisionsk without k thinkingk veryk hard.
Explanation:k Thek optimizationk assumptionk suggestsk that k thekpersonkink questionkisk tryingk to
k maximizek somek objective.k Consumersk arek assumed k tok bek makingk decisionsk that k maximiz
ek theirk happinessk subject k tok ak scarcek amount k of k money.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k R
emember
Difficulty:k 01k Easyk Gradeable
:k automatick LearningkObjectiv
e:k01-01
Topic:k Thinkingk Economically
7. Imaginek ank economist k orderingk donutsk one-by-
one.k Whenk decidingk howkmanyk donutsk tokorderk theykwould kpickk that knumberk wherek thek enjo
yment k of k thek
equalsk thek enjoyment k theyk could k get k fromk usingk thek moneyk onk anotherk good.
a. first k donut
b. last/marginalkdonut
c. average/typicalk donut
d. totalk numberk of k donuts
Explanation:k Thek enjoyment k of k thek last kslicek isk thekmarginalk benefit k ofk that k slice.k If k thisk enjoym
ent k isk morek thank thek enjoyment k fromk somek alternative,k morek willk bek consumed.
AACSB:k Reflectivek Thinking
Pagek 3
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
, Accessibility:kKeyboard kNavigationk Bl
ooms:k Understand
Difficulty:k 02k Mediumk Gradea
ble:k automatick Learningk Objec
tive:k 01-
04k Topic:kThinkingkEconomica
lly
8. Of k course,k allk individualk studentsk arekbetterk offk ifktheykearnk betterkgrades.kIfkyouk werek t
ok concludek that k allk studentsk would k bek betterk off k if k everyonek received k ank A,k youk would
a. havek fallenk victimk tok thek fallacyk of k scarcity.
b. bek right.
c. havekfallenkvictimktokthekfallacykof kcomposition.
d. bek mistakingk correlationk withk causation.
Explanation:k Thek fallacyk of k compositionk isk thek mistakekink logick thatksuggestsk that kthektotalk e
conomick impact k of k somethingk isk alwaysk and k simplyk equalk tok thek sumk ofk thekindividualk parts
.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Gradea
ble:k automatick Learningk Objec
tive:k 01-
04k Topic:kThinkingkEconomica
lly
9. Imaginek youk werek tok conclude,kafterk carefullyk examiningk datakandk usingk properk evalua
tionk techniques,k that k ak taxk credit kforkattendingk collegek benefitsk lowk incomek earnersk morek th
ank ak taxk deductionk(of kequalk totalk costktokthekgovernment)k would.kYouk would khavekengagedk
ink analysisk tok reachk that k conclusion.
a. negative
b. positive
c. normative
d. creative
Explanation:kEconomists,kand ksocialkscientistskinkgeneral,kdistinguishkviewskof k―thekwayk th
ingskare‖ kfromk ―thek waykthingskshould kbe,‖kcallingkthek formerk positivekanalysisk and kthek latte
rk normativek analysis.k Positivek analysisk isk ak formk of k analysisk that k seeksk tokunderstandk thek wa
yk thingsk arek and k whyktheyk arek that kway.kNormativek analysisk isk ak formk ofkanalysisk that k seeksk
tok understand k thek wayk thingsk should k be.
AACSB:k Reflectivek Thinkingk Accessi
bility:kKeyboard kNavigationk Blooms:k U
nderstand
Difficulty:k 02k Mediumk Gradea
ble:k automatick Learningk Objec
tive:k 01-
04k Topic:kThinkingkEconomica
Pagek 4
©k MCGRAWk HILL kLLC.kALLkRIGHTSkRESERVED. kNOkREPRODUCTIONkORkDISTRIBUTIONkWITHOUTkTHEkPRIO
Rk WRITTENk CONSENT k OFk MCGRAWk HILL k LLC.
