Page 1
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PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
,SOLUTION MANUAL FOR xq xq
Issues in Economics Today 10th Edition by Robert Guell
xq xq xq xq xq xq xq xq
Chapter 1-47 xq
Chapter 1 xq
End of Chapter Questions
xq xq xq
Quiz Yourself
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1. Scarcity implies that the allocation decision chosen by society can
xq xq xq xq xq xq xq xq xq
a) not make more of any one good.
xq xq xq xq xq xq
b) always make more of any good. xq xq xq xq xq
c) typically make more of one good but at the expense of making less
xq xq xq xq xq xq xq xq xq xq xq xq x
of another. q xq
d) always make more of all goods simultaneously. Exp
xq xq xq xq xq xq xq
lanation: Scarcity implies that choices involve trade-offs.
xq xq xq xq xq xq
AACSB: Reflective Thinking Accessi
xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Understand
Difficulty: 02 Medium Grad xq xq xq
eable: automatic Learning O
xq xq xq
bjective: 01-01 xq
Topic: Economics and Opportunity Cost
xq xq xq xq
2. A production possibilities frontier is a simple model of
xq xq xq xq xq xq xq xq
a) allocating scarce inputs to the production of alternative outputs.
xq xq xq xq xq xq xq xq
a) price and production/consumption in a market.
xq xq xq xq xq
b) the cost of producing goods. xq xq xq xq
c) the number of inputs required to produce varying levels of output. Explanati
xq xq xq xq xq xq xq xq xq xq x q
on: The production possibilities frontier shows the quantity of two goods that can be
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
produced. It implies that scarcity requires that choices be made as to how to use reso
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
urces.
AACSB: Reflective Thinking Accessi
xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Understand
Difficulty: 02 Medium Grad xq xq xq
eable: automatic Learning O
xq xq xq
bjective: 01-01 xq
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
xq xq xq xq xq xq xq xq
Page 2 xq
©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
,3. The underlying reason that there are unattainable points on a production possibiliti
xq xq xq xq xq xq xq xq xq xq xq
es frontier is that there
xq xq xq xq
a. is government. xq
b. are always choices that must be made. xq xq xq xq xq xq
c. are scarce resources within a fixed level of technology.
xq xq xq xq xq xq xq xq
d. is unemployment of resources. xq xq xq
Explanation: The points outside the production possibilities frontier are unattainable. Th
xq xq xq xq xq xq xq xq xq xq
is means that currently available resources and technology are insufficient to produce a
xq xq xq xq xq xq xq xq xq xq xq xq
mounts greater than those illustrated on the frontier. On a graph, everything beyond th
xq xq xq xq xq xq xq xq xq xq xq xq xq
e frontier is unattainable.
xq xq xq
AACSB: Reflective Thinking Accessi xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Remember
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01-01 xq
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
xq xq xq xq xq xq xq xq
4. The underlying reason production possibilities frontiers are likely to be bowed o
xq xq xq xq xq xq xq xq xq xq xq
ut (rather than linear) is because
xq xq xq xq xq
a. choices have consequences. xq xq
b. there are always opportunity costs. xq xq xq xq
c. some resources and people can be better used producing one good rath
xq xq xq xq xq xq xq xq xq xq xq
er than another. xq xq
d. there is always some level of unemployment. xq xq xq xq xq xq
Explanation: If the production possibilities frontier is not a line but is bowed out away
xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
from the origin, then opportunity cost is increasing. The reason for this is that as we a
q xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
dd more resources to the production of, for example, pizza, we are using fewer resourc
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
es to produce soda. Compounding that problem, at each stage as we take the resources
xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
away from soda and put them into pizza, we are moving workers who are worse at pi
q xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
zza production and better at soda production than those moved in the previous stage. T
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
his means that the increase in pizza production is diminishing and the loss in soda prod
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
uction is increasing. An economist would call this an example of increasing opportunit
xq xq xq xq xq xq xq xq xq xq xq xq
y cost. If the production possibilities frontier is a straight line that is not bowed out aw
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
ay from the origin, then opportunity cost is constant.
xq xq xq xq xq xq xq xq
AACSB: Knowledge Application Acc xq xq xq
essibility: Keyboard Navigation Bloo xq xq xq
ms: Remember xq
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01-02 xq
Topic: Attributes of the Production Possibilities Frontier
xq xq xq xq xq xq
Page 3 xq
©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
, 5. Suppose you were modeling the impact of the introduction of computer automati
xq xq xq xq xq xq xq xq xq xq xq
on into manufacturing on a production possibilities frontier (PPF) with two manufact
xq xq xq xq xq xq xq xq xq xq xq
ured goods on their respective axes. It would be more likely that the result would be
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
q .
a) generalized growth with the PPF moving both up and to the right. xq xq xq xq xq xq xq xq xq xq xq
b) specialized growth with the PPF moving both up and to the right. xq xq xq xq xq xq xq xq xq xq xq
c) generalized growth with the PPF just moving up and not to the right. xq xq xq xq xq xq xq xq xq xq xq xq
d) specialized growth with the PPF just moving up and not to the right. Explana xq xq xq xq xq xq xq xq xq xq xq xq xq
tion: Computer automation is a general improvement in technology so it would impro
xq xq xq xq xq xq xq xq xq xq xq xq
ve all manufacturing. As a result, it would result in generalized growth and move the
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
PPF both up and to the right.
xq xq xq xq xq xq xq
AACSB: Knowledge Application Acc xq xq xq
essibility: Keyboard Navigation Bloo xq xq xq
ms: Remember xq
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01- xq
03 Topic: Economic Growth
xq xq xq
6. The optimization assumption suggests that people make
xq xq xq xq xq xq
a. irrational decisions. xq
b. unpredictable decisions. xq
c. decisions to make themselves as well off as possible. xq xq xq xq xq xq xq xq
d. decisions without thinking very hard. xq xq xq xq
Explanation: The optimization assumption suggests that the person in question is tryin
xq xq xq xq xq xq xq xq xq xq xq
g to maximize some objective. Consumers are assumed to be making decisions that
xq xq xq xq xq xq xq xq xq xq xq xq xq
maximize their happiness subject to a scarce amount of money.
xq xq xq xq xq xq xq xq xq
AACSB: Reflective Thinking Accessi xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Remember
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01-01 xq
Topic: Thinking Economically xq xq
7. Imagine an economist ordering donuts one-by- xq xq xq xq xq
one. When deciding how many donuts to order they would pick that number where the
xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
enjoyment of the
q xq xq xq
equals the enjoyment they could get from using the money on another good.
xq xq xq xq xq xq xq xq xq xq xq xq
a. first donut xq
b. last/marginal donut xq
c. average/typical donut xq
d. total number of donuts xq xq xq
Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this enj
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
oyment is more than the enjoyment from some alternative, more will be consumed.
xq xq xq xq xq xq xq xq xq xq xq xq
Page 4 xq
©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
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©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
,SOLUTION MANUAL FOR xq xq
Issues in Economics Today 10th Edition by Robert Guell
xq xq xq xq xq xq xq xq
Chapter 1-47 xq
Chapter 1 xq
End of Chapter Questions
xq xq xq
Quiz Yourself
xq
1. Scarcity implies that the allocation decision chosen by society can
xq xq xq xq xq xq xq xq xq
a) not make more of any one good.
xq xq xq xq xq xq
b) always make more of any good. xq xq xq xq xq
c) typically make more of one good but at the expense of making less
xq xq xq xq xq xq xq xq xq xq xq xq x
of another. q xq
d) always make more of all goods simultaneously. Exp
xq xq xq xq xq xq xq
lanation: Scarcity implies that choices involve trade-offs.
xq xq xq xq xq xq
AACSB: Reflective Thinking Accessi
xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Understand
Difficulty: 02 Medium Grad xq xq xq
eable: automatic Learning O
xq xq xq
bjective: 01-01 xq
Topic: Economics and Opportunity Cost
xq xq xq xq
2. A production possibilities frontier is a simple model of
xq xq xq xq xq xq xq xq
a) allocating scarce inputs to the production of alternative outputs.
xq xq xq xq xq xq xq xq
a) price and production/consumption in a market.
xq xq xq xq xq
b) the cost of producing goods. xq xq xq xq
c) the number of inputs required to produce varying levels of output. Explanati
xq xq xq xq xq xq xq xq xq xq x q
on: The production possibilities frontier shows the quantity of two goods that can be
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
produced. It implies that scarcity requires that choices be made as to how to use reso
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
urces.
AACSB: Reflective Thinking Accessi
xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Understand
Difficulty: 02 Medium Grad xq xq xq
eable: automatic Learning O
xq xq xq
bjective: 01-01 xq
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
xq xq xq xq xq xq xq xq
Page 2 xq
©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
,3. The underlying reason that there are unattainable points on a production possibiliti
xq xq xq xq xq xq xq xq xq xq xq
es frontier is that there
xq xq xq xq
a. is government. xq
b. are always choices that must be made. xq xq xq xq xq xq
c. are scarce resources within a fixed level of technology.
xq xq xq xq xq xq xq xq
d. is unemployment of resources. xq xq xq
Explanation: The points outside the production possibilities frontier are unattainable. Th
xq xq xq xq xq xq xq xq xq xq
is means that currently available resources and technology are insufficient to produce a
xq xq xq xq xq xq xq xq xq xq xq xq
mounts greater than those illustrated on the frontier. On a graph, everything beyond th
xq xq xq xq xq xq xq xq xq xq xq xq xq
e frontier is unattainable.
xq xq xq
AACSB: Reflective Thinking Accessi xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Remember
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01-01 xq
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
xq xq xq xq xq xq xq xq
4. The underlying reason production possibilities frontiers are likely to be bowed o
xq xq xq xq xq xq xq xq xq xq xq
ut (rather than linear) is because
xq xq xq xq xq
a. choices have consequences. xq xq
b. there are always opportunity costs. xq xq xq xq
c. some resources and people can be better used producing one good rath
xq xq xq xq xq xq xq xq xq xq xq
er than another. xq xq
d. there is always some level of unemployment. xq xq xq xq xq xq
Explanation: If the production possibilities frontier is not a line but is bowed out away
xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
from the origin, then opportunity cost is increasing. The reason for this is that as we a
q xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
dd more resources to the production of, for example, pizza, we are using fewer resourc
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
es to produce soda. Compounding that problem, at each stage as we take the resources
xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
away from soda and put them into pizza, we are moving workers who are worse at pi
q xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
zza production and better at soda production than those moved in the previous stage. T
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
his means that the increase in pizza production is diminishing and the loss in soda prod
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
uction is increasing. An economist would call this an example of increasing opportunit
xq xq xq xq xq xq xq xq xq xq xq xq
y cost. If the production possibilities frontier is a straight line that is not bowed out aw
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
ay from the origin, then opportunity cost is constant.
xq xq xq xq xq xq xq xq
AACSB: Knowledge Application Acc xq xq xq
essibility: Keyboard Navigation Bloo xq xq xq
ms: Remember xq
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01-02 xq
Topic: Attributes of the Production Possibilities Frontier
xq xq xq xq xq xq
Page 3 xq
©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
, 5. Suppose you were modeling the impact of the introduction of computer automati
xq xq xq xq xq xq xq xq xq xq xq
on into manufacturing on a production possibilities frontier (PPF) with two manufact
xq xq xq xq xq xq xq xq xq xq xq
ured goods on their respective axes. It would be more likely that the result would be
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
q .
a) generalized growth with the PPF moving both up and to the right. xq xq xq xq xq xq xq xq xq xq xq
b) specialized growth with the PPF moving both up and to the right. xq xq xq xq xq xq xq xq xq xq xq
c) generalized growth with the PPF just moving up and not to the right. xq xq xq xq xq xq xq xq xq xq xq xq
d) specialized growth with the PPF just moving up and not to the right. Explana xq xq xq xq xq xq xq xq xq xq xq xq xq
tion: Computer automation is a general improvement in technology so it would impro
xq xq xq xq xq xq xq xq xq xq xq xq
ve all manufacturing. As a result, it would result in generalized growth and move the
xq xq xq xq xq xq xq xq xq xq xq xq xq xq
PPF both up and to the right.
xq xq xq xq xq xq xq
AACSB: Knowledge Application Acc xq xq xq
essibility: Keyboard Navigation Bloo xq xq xq
ms: Remember xq
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01- xq
03 Topic: Economic Growth
xq xq xq
6. The optimization assumption suggests that people make
xq xq xq xq xq xq
a. irrational decisions. xq
b. unpredictable decisions. xq
c. decisions to make themselves as well off as possible. xq xq xq xq xq xq xq xq
d. decisions without thinking very hard. xq xq xq xq
Explanation: The optimization assumption suggests that the person in question is tryin
xq xq xq xq xq xq xq xq xq xq xq
g to maximize some objective. Consumers are assumed to be making decisions that
xq xq xq xq xq xq xq xq xq xq xq xq xq
maximize their happiness subject to a scarce amount of money.
xq xq xq xq xq xq xq xq xq
AACSB: Reflective Thinking Accessi xq xq xq
bility: Keyboard Navigation Blooms:
xq xq xq xq
Remember
Difficulty: 01 Easy Gradeabl xq xq xq
e: automatic Learning Object
xq xq xq
ive: 01-01 xq
Topic: Thinking Economically xq xq
7. Imagine an economist ordering donuts one-by- xq xq xq xq xq
one. When deciding how many donuts to order they would pick that number where the
xq xq xq xq xq xq xq xq xq xq xq xq xq xq x
enjoyment of the
q xq xq xq
equals the enjoyment they could get from using the money on another good.
xq xq xq xq xq xq xq xq xq xq xq xq
a. first donut xq
b. last/marginal donut xq
c. average/typical donut xq
d. total number of donuts xq xq xq
Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this enj
xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq xq
oyment is more than the enjoyment from some alternative, more will be consumed.
xq xq xq xq xq xq xq xq xq xq xq xq
Page 4 xq
©xqMCGRAWxqHILLxqLLC.xqALLxqRIGHTSxqRESERVED.xqNOxqREPRODUCTIONxqORxqDISTRIBUTIONxqWITHOUTxqTHExq
PRIORx q WRITTENxqCONSENTxqOFxqMCGRAWxqHILLxqLLC.
