Solution manual for foundations of business 7th edition by william m pride

Solution Manual x




Foundations of Business 7th Edition
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by William M. Pride, All chapter 1 - 47
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,Chapter1 x




End of Chapter Questions
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Quiz Yourself
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1. Scarcity implies that the allocation decision chosen by society can
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a) not make more of any one good. x x x x x x




b) always make more of any good. x x x x x




c) typically make more of one good but at the expense of making less of x x x x x x x x x x x x x




another. x




d) always make more of all goods simultaneously. x x x x x x




Explanation: Scarcityimplies that choices involve trade-offs.
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AACSB: Reflective Thinking x x




Accessibility: Keyboard Navigation
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Blooms: Understand
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Difficulty: 02 Medium x x




Gradeable: automatic
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LearningObjective:01-01
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Topic: Economics and Opportunity Cost
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2. A production possibilities frontier is a simple model of
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a) allocating scarce inputs to the production of alternative outputs. x x x x x x x x




a) price and production/consumption in a market.
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b) the cost of producing goods. x x x x




c) the number of inputs required to produce varying levels of output. Explanation:
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The production possibilities frontier shows the quantity of two goods that can be produced.
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It implies that scarcity requires that choices be made as to how to use resources.
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AACSB: Reflective Thinking x x




Accessibility: Keyboard Navigation
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Blooms: Understand
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Difficulty: 02 Medium x x




Gradeable: automatic
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LearningObjective:01-01
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Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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,3. The underlying reason that there are unattainable points on a production possibilities
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frontier is that there
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a. is government. x




b. are always choices that must be made. x x x x x x




c. are scarce resources within a fixed level of technology. x x x x x x x x




d. is unemployment of resources. x x x




Explanation: The points outside the production possibilities frontier are unattainable. This
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means that currently available resources and technology are insufficient to produce amounts
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greater than those illustrated on the frontier. On a graph, everything beyond the frontier is
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unattainable.
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AACSB: Reflective Thinking x x




Accessibility: Keyboard Navigation
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Blooms: Remember
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Difficulty: 01 Easy Gradeable: x x x




automatic LearningObjective:
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01-01
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Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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4. The underlying reason production possibilities frontiers are likely to be bowed out
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(rather than linear) is because
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a. choices have consequences. x x




b. there are always opportunity costs. x x x x




c. some resources and people can be better used producing one good rather x x x x x x x x x x x




than another. x x




d. there is always some level of unemployment. x x x x x x




Explanation: If the production possibilities frontier is not a line but is bowed out away from
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the origin, then opportunity cost is increasing. The reason for this is that as we add more
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resources to the production of, for example, pizza, we are using fewer resources to produce
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soda. Compounding that problem, at each stage as we take the resources away from soda and
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put them into pizza, we are moving workers who are worse at pizza production and better at
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soda production than those moved in the previous stage. This means that the increase in pizza
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production is diminishing and the loss in soda production is increasing. An economist would
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call this an example of increasing opportunity cost. If the production possibilities frontier is a
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straight line that is not bowed out away from the origin, then opportunity cost is constant.
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AACSB: Knowledge Application x x




Accessibility: Keyboard Navigation
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Blooms: Remember
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Difficulty: 01 Easy Gradeable: x x x




automatic LearningObjective:
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01-02
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Topic: Attributes of the Production Possibilities Frontier
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, 5. Suppose you were modeling the impact of the introduction of computer automation into
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manufacturing on a production possibilities frontier (PPF) with two manufactured goods
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on their respective axes. It would be more likely that the result would be
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a) generalized growth with the PPF moving both up and to the right. x x x x x x x x x x x




b) specialized growth with the PPF moving both up and to the right. x x x x x x x x x x x




c) generalized growth with the PPF just moving up and not to the right. x x x x x x x x x x x x




d) specialized growth with the PPF just moving up and not to the right. Explanation: x x x x x x x x x x x x x




Computer automation is a general improvement in technology so it would improve all
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manufacturing. As a result, it would result in generalized growth and move the PPF both up
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and to the right.
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AACSB: Knowledge Application x x




Accessibility: Keyboard Navigation
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Blooms: Remember
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Difficulty: 01 Easy Gradeable: x x x




automatic LearningObjective:
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01-03 Topic: Economic
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Growth
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6. The optimization assumption suggests that people make
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a. irrational decisions. x




b. unpredictable decisions. x




c. decisions to make themselves as well off as possible. x x x x x x x x




d. decisions without thinking very hard. x x x x




Explanation: The optimization assumption suggests that the person in question is trying to
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maximize some objective. Consumers are assumed to be making decisions that maximize
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their happiness subject to a scarce amount of money.
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AACSB: Reflective Thinking x x




Accessibility: Keyboard Navigation
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Blooms: Remember
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Difficulty: 01 Easy Gradeable: x x x




automatic LearningObjective:
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01-01
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Topic: Thinking Economically
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