SolutionManual
FoundationsofBusiness7thEdition
byWilliamM.Pride,Allchapter1-47
,Chapter1
EndofChapterQuestions
Quiz Yourself
1. Scarcityimplies that the allocation decision chosen bysocietycan
a) not make more of anyone good.
b) always make moreof anygood.
c) typically make moreof onegood butattheexpense of making less of
another.
d) always make more of all goods simultaneously.
Explanation:Scarcityimpliesthatchoicesinvolvetrade-offs.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Understand
Difficulty: 02 Medium
Gradeable: automatic
LearningObjective:01-01
Topic: Economics and OpportunityCost
2. Aproduction possibilities frontieris asimple model of
a) allocating scarceinputs to theproduction of alternative outputs.
a) priceand production/consumption in a market.
b) the cost of producing goods.
c) the number of inputs required to produce varying levels of output. Explanation:The
productionpossibilitiesfrontiershowsthequantityoftwo goods that can beproduced. It
implies that scarcityrequires thatchoices bemadeas to howtouse resources.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Understand
Difficulty: 02 Medium
Gradeable: automatic
LearningObjective:01-01
Topic: ModelingOpportunityCost Using the Production Possibilities Frontier
,3. Theunderlyingreason thatthereareunattainablepoints onaproduction possibilities
frontier is that there
a. is government.
b. arealways choices that must be made.
c. arescarce resources within afixed level of technology.
d. is unemployment of resources.
Explanation:Thepointsoutsidetheproductionpossibilitiesfrontierareunattainable.This
means that currentlyavailable resources and technology are insufficient to produce amounts
greater than those illustrated on the frontier. On a graph, everything beyond the frontier is
unattainable.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-01
Topic: ModelingOpportunityCost Using the Production Possibilities Frontier
4. Theunderlyingreason production possibilities frontiersarelikelytobebowed out
(rather than linear) is because
a. choices have consequences.
b. there are always opportunitycosts.
c. someresourcesandpeoplecanbebetterusedproducingonegoodrather than
another.
d. thereis always some level of unemployment.
Explanation: If the production possibilities frontier is not a line but is bowed out awayfrom the
origin, then opportunity cost is increasing. The reason for this is that as we add more resources to
the production of, for example, pizza, we are using fewer resources to produce soda.
Compounding that problem, at each stage as we take the resources away from soda and put them
into pizza, we are moving workers who are worse at pizza production and better at soda
production than those moved in the previous stage. This means that theincreasein pizza
production is diminishingandtheloss in sodaproduction is increasing. An economist would call
this an example of increasing opportunitycost. If the production possibilities frontier is a straight
line that is not bowed out awayfrom the origin, then opportunitycost is constant.
AACSB: Knowledge Application
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-02
Topic: Attributes of the Production Possibilities Frontier
, 5. Suppose you weremodelingtheimpactoftheintroductionofcomputerautomation into
manufacturing on a production possibilities frontier (PPF) with two manufactured goods on
their respective axes. It would be more likelythat the result would be .
a) generalized growth with the PPFmoving both up and to the right.
b) specialized growth with the PPFmovingboth up and to the right.
c) generalized growth with the PPFjust movingup and not to the right.
d) specialized growth with the PPF just moving up and not to the right. Explanation:
Computerautomationis ageneral improvement intechnologysoit would improveall
manufacturing. As aresult, it wouldresult ingeneralized growth and move the PPF both up
and to the right.
AACSB: Knowledge Application
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-03 Topic: Economic
Growth
6. Theoptimization assumption suggests that people make
a. irrational decisions.
b. unpredictabledecisions.
c. decisions to makethemselves as well off as possible.
d. decisions without thinkingveryhard.
Explanation:Theoptimizationassumptionsuggeststhatthepersoninquestionis trying to
maximize some objective. Consumers are assumed to be making decisions that maximize their
happiness subject to a scarce amount of money.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-01
Topic: ThinkingEconomically
FoundationsofBusiness7thEdition
byWilliamM.Pride,Allchapter1-47
,Chapter1
EndofChapterQuestions
Quiz Yourself
1. Scarcityimplies that the allocation decision chosen bysocietycan
a) not make more of anyone good.
b) always make moreof anygood.
c) typically make moreof onegood butattheexpense of making less of
another.
d) always make more of all goods simultaneously.
Explanation:Scarcityimpliesthatchoicesinvolvetrade-offs.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Understand
Difficulty: 02 Medium
Gradeable: automatic
LearningObjective:01-01
Topic: Economics and OpportunityCost
2. Aproduction possibilities frontieris asimple model of
a) allocating scarceinputs to theproduction of alternative outputs.
a) priceand production/consumption in a market.
b) the cost of producing goods.
c) the number of inputs required to produce varying levels of output. Explanation:The
productionpossibilitiesfrontiershowsthequantityoftwo goods that can beproduced. It
implies that scarcityrequires thatchoices bemadeas to howtouse resources.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Understand
Difficulty: 02 Medium
Gradeable: automatic
LearningObjective:01-01
Topic: ModelingOpportunityCost Using the Production Possibilities Frontier
,3. Theunderlyingreason thatthereareunattainablepoints onaproduction possibilities
frontier is that there
a. is government.
b. arealways choices that must be made.
c. arescarce resources within afixed level of technology.
d. is unemployment of resources.
Explanation:Thepointsoutsidetheproductionpossibilitiesfrontierareunattainable.This
means that currentlyavailable resources and technology are insufficient to produce amounts
greater than those illustrated on the frontier. On a graph, everything beyond the frontier is
unattainable.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-01
Topic: ModelingOpportunityCost Using the Production Possibilities Frontier
4. Theunderlyingreason production possibilities frontiersarelikelytobebowed out
(rather than linear) is because
a. choices have consequences.
b. there are always opportunitycosts.
c. someresourcesandpeoplecanbebetterusedproducingonegoodrather than
another.
d. thereis always some level of unemployment.
Explanation: If the production possibilities frontier is not a line but is bowed out awayfrom the
origin, then opportunity cost is increasing. The reason for this is that as we add more resources to
the production of, for example, pizza, we are using fewer resources to produce soda.
Compounding that problem, at each stage as we take the resources away from soda and put them
into pizza, we are moving workers who are worse at pizza production and better at soda
production than those moved in the previous stage. This means that theincreasein pizza
production is diminishingandtheloss in sodaproduction is increasing. An economist would call
this an example of increasing opportunitycost. If the production possibilities frontier is a straight
line that is not bowed out awayfrom the origin, then opportunitycost is constant.
AACSB: Knowledge Application
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-02
Topic: Attributes of the Production Possibilities Frontier
, 5. Suppose you weremodelingtheimpactoftheintroductionofcomputerautomation into
manufacturing on a production possibilities frontier (PPF) with two manufactured goods on
their respective axes. It would be more likelythat the result would be .
a) generalized growth with the PPFmoving both up and to the right.
b) specialized growth with the PPFmovingboth up and to the right.
c) generalized growth with the PPFjust movingup and not to the right.
d) specialized growth with the PPF just moving up and not to the right. Explanation:
Computerautomationis ageneral improvement intechnologysoit would improveall
manufacturing. As aresult, it wouldresult ingeneralized growth and move the PPF both up
and to the right.
AACSB: Knowledge Application
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-03 Topic: Economic
Growth
6. Theoptimization assumption suggests that people make
a. irrational decisions.
b. unpredictabledecisions.
c. decisions to makethemselves as well off as possible.
d. decisions without thinkingveryhard.
Explanation:Theoptimizationassumptionsuggeststhatthepersoninquestionis trying to
maximize some objective. Consumers are assumed to be making decisions that maximize their
happiness subject to a scarce amount of money.
AACSB: Reflective Thinking
Accessibility:KeyboardNavigation
Blooms: Remember
Difficulty: 01 EasyGradeable:
automatic LearningObjective:
01-01
Topic: ThinkingEconomically
