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Foundations of Business 7th Edition
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by William M. Pride, All chapter 1 - 47
oi oi oi oi oi oi oi oi oi
1|Page
, Chapter691
End6 9 of69 Chapter6 9 Questions
Quiz6 9 Yourself
1. Scarcity6 9 implies6 9 that6 9 the6 9 allocation6 9 decision6 9 chosen6 9 by6 9 society6 9 can
a) not6 9 make6 9 more6 9 of6 9 any6 9 one6 9 good.
b) always6 9 make6 9 more6 9 of6 9 any6 9 good.
c) typically6 9 make6 9 more6 9 of6 9 one6 9 good6 9 but6 9 at6 9 the6 9 expen
se6 9 of6 9 making69less6 9 of6 9 another.
d) always6 9 make6 9 more6 9 of6 9 all6 9 goods6 9 simult
aneously.69Explanation:6 9 Scarcity69implies6 9 that6 9 choic
es6 9 involve6 9 trade-69offs.
AACSB:69Reflective69Thinking69Acc
essibility:69Keyboard69Navigation69Bl
oom69s:6 9 Understand
Difficulty:690269Medium69G
radeable:
automatic
69Learning69Objective:6 9 01-
01
Topic:6 9 Economics6 9 and6 9 Opportunity6 9 Cost
2. A6 9 production6 9 possibilities6 9 frontier6 9 is6 9 a6 9 simple6 9 model6 9 of
a) allocating6 9 scarce6 9 inputs6 9 to6 9 the6 9 production6 9 of6 9 alternative6 9 outputs.
a) price6 9 and6 9 production/consumption6 9 in6 9 a6 9 market.
b) the6 9 cost6 9 of6 9 producing6 9 goods.
c) the69number69of69inputs69required69to69produce69varying69levels69of69output.
6 9 Explanation:6 9 The6 9 production6 9 possibilities6 9 frontier6 9 shows6 9 the6 9 quantity
6 9 of6 9 two6 9 goods6 9 t69hat6 9 can6 9 be6 9 produced.6 9 It6 9 implies6 9 that6 9 scarcity6
9 requires6 9 that6 9 choices6 9 be69made6 9 as6 9 t69o6 9 how6 9 to6 9 use6 9 resources.
AACSB:69Reflective69Thinking69Acc
essibility:69Keyboard69Navigation69Bl
oom69s:6 9 Understand
Difficulty:690269Medium69G
radeable:
automatic
69Learning69Objective:6 9 01-
01
Topic:6 9 Modeling6 9 Opportunity6 9 Cost6 9 Using6 9 the6 9 Production6 9 Possibilities6 9 Frontie
r
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,3. The6 9 underlying6 9 reason6 9 that6 9 there6 9 are6 9 unattainable6 9 points6 9 on6
9 a6 9 production69possibilities6 9 frontier6 9 is6 9 that6 9 there
a. is6 9 government.
b. are6 9 always6 9 choices6 9 that6 9 must6 9 be6 9 made.
c. are6 9 scarce6 9 resources6 9 within6 9 a6 9 fixed6 9 level6 9 of6 9 technology.
d. is6 9 unemployment6 9 of6 9 resources.
Explanation:6 9 The6 9 points6 9 outside6 9 the6 9 production6 9 possibilities6 9 frontier6 9 are6 9 unat
tainable
.6 9 This6 9 means6 9 that6 9 currently6 9 available6 9 resources6 9 and6 9 technology6 9 are6 9
insufficient6 9 to69produce6 9 amounts6 9 greater6 9 than6 9 those6 9 illustrated6 9 on6 9 the6
9 frontier.6 9 On6 9 a6 9 graph,69everything6 9 beyond6 9 the6 9 frontier6 9 is6 9 unattainable.
AACSB:69Reflective69Thinking69Acc
essibility:69Keyboard69Navigation69Bl
oom69s:6 9 Remember
Difficulty:690169Easy69Grad
eable:
automatic
69Learning69Objective:6 9 01-
01
Topic:6 9 Modeling6 9 Opportunity6 9 Cost6 9 Using6 9 the6 9 Production6 9 Possibilities6 9 Frontie
r
4. The6 9 underlying6 9 reason6 9 production6 9 possibilities6 9 frontiers6 9 are6 9 l
ikely6 9 to6 9 be69bowed6 9 out6 9 (rather6 9 than6 9 linear)6 9 is6 9 because
a. choices6 9 have6 9 consequences.
b. there6 9 are6 9 always6 9 opportunity6 9 costs.
c. some6 9 resources6 9 and6 9 people6 9 can6 9 be6 9 better6 9 used6 9 produci
ng6 9 one6 9 good69rather6 9 than6 9 another.
d. there6 9 is6 9 always6 9 some6 9 level6 9 of6 9 unemployment.
Explanation:6 9 If6 9 the6 9 production6 9 possibilities6 9 frontier6 9 is6 9 not6 9 a6 9 line6 9 but6
9 is6 9 bowed6 9 out69away6 9 from6 9 the6 9 origin,6 9 then6 9 opportunity6 9 cost6 9 is6 9 i
ncreasing.6 9 The6 9 reason6 9 for6 9 this6 9 is69that6 9 as6 9 we6 9 add6 9 more6 9 resour
ces6 9 to6 9 the6 9 production6 9 of,6 9 for6 9 example,6 9 pizza,6 9 we6 9 are69using6 9 fe
wer6 9 resources6 9 to6 9 produce6 9 soda.6 9 Compounding6 9 that6 9 problem,6 9 at6 9 ea
ch6 9 stage69as6 9 we6 9 take6 9 the6 9 resources6 9 away6 9 from6 9 soda6 9 and6 9 put6
9 them6 9 into6 9 pizza,6 9 we6 9 are69moving6 9 workers6 9 who6 9 are6 9 worse6 9 at6 9 piz
za6 9 production6 9 and6 9 better6 9 at6 9 soda6 9 production69than6 9 those6 9 moved6 9 in6
9 the6 9 previous6 9 stage.6 9 This6 9 means6 9 that6 9 the6 9 increase6 9 in6 9 pizza69produc
t69ion6 9 is6 9 diminishing6 9 and6 9 the6 9 loss6 9 in6 9 soda6 9 production6 9 is6 9 increasing.6
9 An69economist6 9 would6 9 call6 9 this6 9 an6 9 example6 9 of6 9 increasing6 9 opportunity6 9
cost.6 9 If6 9 the69production6 9 possibilities6 9 frontier6 9 is6 9 a6 9 straight6 9 line6 9 that
6 9 is6 9 not6 9 bowed6 9 out6 9 away69from6 9 the6 9 origin,6 9 then69opportunity6 9 cost6
9 is6 9 constant.
AACSB:69Knowledge69Application69
Accessibility:69Keyboard69Navigation
69Blooms:6 9 Remember
369|69P69a69
g69e
, Difficulty:690169Easy69Grad
eable:
automatic
69Learning69Objective:6 9 01-
02
Topic:6 9 Attributes6 9 of6 9 the6 9 Production6 9 Possibilities6 9 Frontier
469|69P69a69
g69e
Foundations of Business 7th Edition
oi oi oi oi oi
by William M. Pride, All chapter 1 - 47
oi oi oi oi oi oi oi oi oi
1|Page
, Chapter691
End6 9 of69 Chapter6 9 Questions
Quiz6 9 Yourself
1. Scarcity6 9 implies6 9 that6 9 the6 9 allocation6 9 decision6 9 chosen6 9 by6 9 society6 9 can
a) not6 9 make6 9 more6 9 of6 9 any6 9 one6 9 good.
b) always6 9 make6 9 more6 9 of6 9 any6 9 good.
c) typically6 9 make6 9 more6 9 of6 9 one6 9 good6 9 but6 9 at6 9 the6 9 expen
se6 9 of6 9 making69less6 9 of6 9 another.
d) always6 9 make6 9 more6 9 of6 9 all6 9 goods6 9 simult
aneously.69Explanation:6 9 Scarcity69implies6 9 that6 9 choic
es6 9 involve6 9 trade-69offs.
AACSB:69Reflective69Thinking69Acc
essibility:69Keyboard69Navigation69Bl
oom69s:6 9 Understand
Difficulty:690269Medium69G
radeable:
automatic
69Learning69Objective:6 9 01-
01
Topic:6 9 Economics6 9 and6 9 Opportunity6 9 Cost
2. A6 9 production6 9 possibilities6 9 frontier6 9 is6 9 a6 9 simple6 9 model6 9 of
a) allocating6 9 scarce6 9 inputs6 9 to6 9 the6 9 production6 9 of6 9 alternative6 9 outputs.
a) price6 9 and6 9 production/consumption6 9 in6 9 a6 9 market.
b) the6 9 cost6 9 of6 9 producing6 9 goods.
c) the69number69of69inputs69required69to69produce69varying69levels69of69output.
6 9 Explanation:6 9 The6 9 production6 9 possibilities6 9 frontier6 9 shows6 9 the6 9 quantity
6 9 of6 9 two6 9 goods6 9 t69hat6 9 can6 9 be6 9 produced.6 9 It6 9 implies6 9 that6 9 scarcity6
9 requires6 9 that6 9 choices6 9 be69made6 9 as6 9 t69o6 9 how6 9 to6 9 use6 9 resources.
AACSB:69Reflective69Thinking69Acc
essibility:69Keyboard69Navigation69Bl
oom69s:6 9 Understand
Difficulty:690269Medium69G
radeable:
automatic
69Learning69Objective:6 9 01-
01
Topic:6 9 Modeling6 9 Opportunity6 9 Cost6 9 Using6 9 the6 9 Production6 9 Possibilities6 9 Frontie
r
269|69P69a69
g69e
,3. The6 9 underlying6 9 reason6 9 that6 9 there6 9 are6 9 unattainable6 9 points6 9 on6
9 a6 9 production69possibilities6 9 frontier6 9 is6 9 that6 9 there
a. is6 9 government.
b. are6 9 always6 9 choices6 9 that6 9 must6 9 be6 9 made.
c. are6 9 scarce6 9 resources6 9 within6 9 a6 9 fixed6 9 level6 9 of6 9 technology.
d. is6 9 unemployment6 9 of6 9 resources.
Explanation:6 9 The6 9 points6 9 outside6 9 the6 9 production6 9 possibilities6 9 frontier6 9 are6 9 unat
tainable
.6 9 This6 9 means6 9 that6 9 currently6 9 available6 9 resources6 9 and6 9 technology6 9 are6 9
insufficient6 9 to69produce6 9 amounts6 9 greater6 9 than6 9 those6 9 illustrated6 9 on6 9 the6
9 frontier.6 9 On6 9 a6 9 graph,69everything6 9 beyond6 9 the6 9 frontier6 9 is6 9 unattainable.
AACSB:69Reflective69Thinking69Acc
essibility:69Keyboard69Navigation69Bl
oom69s:6 9 Remember
Difficulty:690169Easy69Grad
eable:
automatic
69Learning69Objective:6 9 01-
01
Topic:6 9 Modeling6 9 Opportunity6 9 Cost6 9 Using6 9 the6 9 Production6 9 Possibilities6 9 Frontie
r
4. The6 9 underlying6 9 reason6 9 production6 9 possibilities6 9 frontiers6 9 are6 9 l
ikely6 9 to6 9 be69bowed6 9 out6 9 (rather6 9 than6 9 linear)6 9 is6 9 because
a. choices6 9 have6 9 consequences.
b. there6 9 are6 9 always6 9 opportunity6 9 costs.
c. some6 9 resources6 9 and6 9 people6 9 can6 9 be6 9 better6 9 used6 9 produci
ng6 9 one6 9 good69rather6 9 than6 9 another.
d. there6 9 is6 9 always6 9 some6 9 level6 9 of6 9 unemployment.
Explanation:6 9 If6 9 the6 9 production6 9 possibilities6 9 frontier6 9 is6 9 not6 9 a6 9 line6 9 but6
9 is6 9 bowed6 9 out69away6 9 from6 9 the6 9 origin,6 9 then6 9 opportunity6 9 cost6 9 is6 9 i
ncreasing.6 9 The6 9 reason6 9 for6 9 this6 9 is69that6 9 as6 9 we6 9 add6 9 more6 9 resour
ces6 9 to6 9 the6 9 production6 9 of,6 9 for6 9 example,6 9 pizza,6 9 we6 9 are69using6 9 fe
wer6 9 resources6 9 to6 9 produce6 9 soda.6 9 Compounding6 9 that6 9 problem,6 9 at6 9 ea
ch6 9 stage69as6 9 we6 9 take6 9 the6 9 resources6 9 away6 9 from6 9 soda6 9 and6 9 put6
9 them6 9 into6 9 pizza,6 9 we6 9 are69moving6 9 workers6 9 who6 9 are6 9 worse6 9 at6 9 piz
za6 9 production6 9 and6 9 better6 9 at6 9 soda6 9 production69than6 9 those6 9 moved6 9 in6
9 the6 9 previous6 9 stage.6 9 This6 9 means6 9 that6 9 the6 9 increase6 9 in6 9 pizza69produc
t69ion6 9 is6 9 diminishing6 9 and6 9 the6 9 loss6 9 in6 9 soda6 9 production6 9 is6 9 increasing.6
9 An69economist6 9 would6 9 call6 9 this6 9 an6 9 example6 9 of6 9 increasing6 9 opportunity6 9
cost.6 9 If6 9 the69production6 9 possibilities6 9 frontier6 9 is6 9 a6 9 straight6 9 line6 9 that
6 9 is6 9 not6 9 bowed6 9 out6 9 away69from6 9 the6 9 origin,6 9 then69opportunity6 9 cost6
9 is6 9 constant.
AACSB:69Knowledge69Application69
Accessibility:69Keyboard69Navigation
69Blooms:6 9 Remember
369|69P69a69
g69e
, Difficulty:690169Easy69Grad
eable:
automatic
69Learning69Objective:6 9 01-
02
Topic:6 9 Attributes6 9 of6 9 the6 9 Production6 9 Possibilities6 9 Frontier
469|69P69a69
g69e
