Page t1
© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
,SOLUTION MANUAL FOR t t
Foundations of Business 7e William M. Pride;
t t t t t t
Chapter t1-47
Chapter 1 t
End of Chapter Questions
t t t
Quiz tYourself
1. Scarcity timplies tthat tthe tallocation tdecision tchosen tby tsociety tcan
a) not tmake tmore tof tany tone tgood.
b) always tmake tmore tof tany tgood.
c) typically tmake tmore tof tone tgood tbut tat tthe texpense tof tmaking tless tof
tanother.
d) always tmake tmore tof tall tgoods tsimultaneously.
tExplanation: tScarcity timplies tthat tchoices tinvolve ttrade-offs.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tUnderstand
Difficulty: t02 tMedium
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tEconomics tand tOpportunity tCost
2. A tproduction tpossibilities tfrontier tis ta tsimple tmodel tof
a) allocating tscarce tinputs tto tthe tproduction tof talternative toutputs.
a) price tand tproduction/consumption tin ta tmarket.
b) the tcost tof tproducing tgoods.
c) the tnumber tof tinputs trequired tto tproduce tvarying tlevels tof toutput.
t Explanation: tThe tproduction tpossibilities tfrontier tshows tthe tquantity tof ttwo tgoods tthat
tcan tbe tproduced. tIt timplies tthat tscarcity trequires tthat tchoices tbe tmade tas tto thow tto tuse
tresources.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tUnderstand
Difficulty: t02 tMedium
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tModeling tOpportunity tCost tUsing tthe tProduction tPossibilities tFrontier
Page t2
© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
,3. The tunderlying treason tthat tthere tare tunattainable tpoints ton ta tproduction tpossibilities
tfrontier tis tthat tthere
a. is tgovernment.
b. are talways tchoices tthat tmust tbe tmade.
c. are tscarce tresources twithin ta tfixed tlevel tof ttechnology.
d. is tunemployment tof tresources.
Explanation: tThe tpoints toutside tthe tproduction tpossibilities tfrontier tare tunattainable. tThis
tmeans tthat tcurrently tavailable tresources tand ttechnology tare tinsufficient tto tproduce
tamounts tgreater tthan tthose tillustrated ton tthe tfrontier. tOn ta tgraph, teverything tbeyond tthe
tfrontier tis tunattainable.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tModeling tOpportunity tCost tUsing tthe tProduction tPossibilities tFrontier
4. The tunderlying treason tproduction tpossibilities tfrontiers tare tlikely tto tbe tbowed tout
t(rather tthan tlinear) tis tbecause
a. choices thave tconsequences.
b. there tare talways topportunity tcosts.
c. some tresources tand tpeople tcan tbe tbetter tused tproducing tone tgood trather
tthan tanother.
d. there tis talways tsome tlevel tof tunemployment.
Explanation: tIf tthe tproduction tpossibilities tfrontier tis tnot ta tline tbut tis tbowed tout taway
tfrom tthe torigin, tthen topportunity tcost tis tincreasing. tThe treason tfor tthis tis tthat tas twe tadd
tmore tresources tto tthe tproduction tof, tfor texample, tpizza, twe tare tusing tfewer tresources tto
tproduce tsoda. tCompounding tthat tproblem, tat teach tstage tas twe ttake tthe tresources taway
tfrom tsoda tand tput tthem tinto tpizza, twe tare tmoving tworkers twho tare tworse tat tpizza
tproduction tand tbetter tat tsoda tproduction tthan tthose tmoved tin tthe tprevious tstage. tThis
tmeans tthat tthe tincrease tin tpizza tproduction tis tdiminishing tand tthe tloss tin tsoda tproduction
tis tincreasing. tAn teconomist twould tcall tthis tan texample tof tincreasing topportunity tcost. t If
tthe tproduction tpossibilities tfrontier tis ta tstraight tline tthat tis tnot tbowed tout taway tfrom tthe
torigin, tthen topportunity tcost tis tconstant.
AACSB: tKnowledge tApplication
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-02
Topic: tAttributes tof tthe tProduction tPossibilities tFrontier
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© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
, 5. Suppose tyou twere tmodeling tthe timpact tof tthe tintroduction tof tcomputer tautomation
tinto tmanufacturing ton ta tproduction tpossibilities tfrontier t(PPF) twith ttwo tmanufactured
tgoods ton ttheir trespective taxes. t It twould tbe tmore tlikely tthat tthe tresult twould tbe t .
a) generalized tgrowth twith tthe tPPF tmoving tboth tup tand tto tthe tright.
b) specialized tgrowth twith tthe tPPF tmoving tboth tup tand tto tthe tright.
c) generalized tgrowth twith tthe tPPF tjust tmoving tup tand tnot tto tthe tright.
d) specialized tgrowth twith tthe tPPF tjust tmoving tup tand tnot tto tthe tright.
tExplanation: tComputer tautomation tis ta tgeneral timprovement tin ttechnology tso tit twould
timprove tall tmanufacturing. tAs ta tresult, tit twould tresult tin tgeneralized tgrowth tand tmove
tthe tPPF tboth tup tand tto tthe tright.
AACSB: tKnowledge tApplication
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-03
tTopic: tEconomic tGrowth
6. The toptimization tassumption tsuggests tthat tpeople tmake
a. irrational tdecisions.
b. unpredictable tdecisions.
c. decisions tto tmake tthemselves tas twell toff tas tpossible.
d. decisions twithout tthinking tvery thard.
Explanation: tThe toptimization tassumption tsuggests tthat tthe tperson tin tquestion tis ttrying tto
tmaximize tsome tobjective. tConsumers tare tassumed tto tbe tmaking tdecisions tthat
tmaximize ttheir thappiness tsubject tto ta tscarce tamount tof tmoney.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tThinking tEconomically
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© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
,SOLUTION MANUAL FOR t t
Foundations of Business 7e William M. Pride;
t t t t t t
Chapter t1-47
Chapter 1 t
End of Chapter Questions
t t t
Quiz tYourself
1. Scarcity timplies tthat tthe tallocation tdecision tchosen tby tsociety tcan
a) not tmake tmore tof tany tone tgood.
b) always tmake tmore tof tany tgood.
c) typically tmake tmore tof tone tgood tbut tat tthe texpense tof tmaking tless tof
tanother.
d) always tmake tmore tof tall tgoods tsimultaneously.
tExplanation: tScarcity timplies tthat tchoices tinvolve ttrade-offs.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tUnderstand
Difficulty: t02 tMedium
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tEconomics tand tOpportunity tCost
2. A tproduction tpossibilities tfrontier tis ta tsimple tmodel tof
a) allocating tscarce tinputs tto tthe tproduction tof talternative toutputs.
a) price tand tproduction/consumption tin ta tmarket.
b) the tcost tof tproducing tgoods.
c) the tnumber tof tinputs trequired tto tproduce tvarying tlevels tof toutput.
t Explanation: tThe tproduction tpossibilities tfrontier tshows tthe tquantity tof ttwo tgoods tthat
tcan tbe tproduced. tIt timplies tthat tscarcity trequires tthat tchoices tbe tmade tas tto thow tto tuse
tresources.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tUnderstand
Difficulty: t02 tMedium
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tModeling tOpportunity tCost tUsing tthe tProduction tPossibilities tFrontier
Page t2
© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
,3. The tunderlying treason tthat tthere tare tunattainable tpoints ton ta tproduction tpossibilities
tfrontier tis tthat tthere
a. is tgovernment.
b. are talways tchoices tthat tmust tbe tmade.
c. are tscarce tresources twithin ta tfixed tlevel tof ttechnology.
d. is tunemployment tof tresources.
Explanation: tThe tpoints toutside tthe tproduction tpossibilities tfrontier tare tunattainable. tThis
tmeans tthat tcurrently tavailable tresources tand ttechnology tare tinsufficient tto tproduce
tamounts tgreater tthan tthose tillustrated ton tthe tfrontier. tOn ta tgraph, teverything tbeyond tthe
tfrontier tis tunattainable.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tModeling tOpportunity tCost tUsing tthe tProduction tPossibilities tFrontier
4. The tunderlying treason tproduction tpossibilities tfrontiers tare tlikely tto tbe tbowed tout
t(rather tthan tlinear) tis tbecause
a. choices thave tconsequences.
b. there tare talways topportunity tcosts.
c. some tresources tand tpeople tcan tbe tbetter tused tproducing tone tgood trather
tthan tanother.
d. there tis talways tsome tlevel tof tunemployment.
Explanation: tIf tthe tproduction tpossibilities tfrontier tis tnot ta tline tbut tis tbowed tout taway
tfrom tthe torigin, tthen topportunity tcost tis tincreasing. tThe treason tfor tthis tis tthat tas twe tadd
tmore tresources tto tthe tproduction tof, tfor texample, tpizza, twe tare tusing tfewer tresources tto
tproduce tsoda. tCompounding tthat tproblem, tat teach tstage tas twe ttake tthe tresources taway
tfrom tsoda tand tput tthem tinto tpizza, twe tare tmoving tworkers twho tare tworse tat tpizza
tproduction tand tbetter tat tsoda tproduction tthan tthose tmoved tin tthe tprevious tstage. tThis
tmeans tthat tthe tincrease tin tpizza tproduction tis tdiminishing tand tthe tloss tin tsoda tproduction
tis tincreasing. tAn teconomist twould tcall tthis tan texample tof tincreasing topportunity tcost. t If
tthe tproduction tpossibilities tfrontier tis ta tstraight tline tthat tis tnot tbowed tout taway tfrom tthe
torigin, tthen topportunity tcost tis tconstant.
AACSB: tKnowledge tApplication
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-02
Topic: tAttributes tof tthe tProduction tPossibilities tFrontier
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© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
, 5. Suppose tyou twere tmodeling tthe timpact tof tthe tintroduction tof tcomputer tautomation
tinto tmanufacturing ton ta tproduction tpossibilities tfrontier t(PPF) twith ttwo tmanufactured
tgoods ton ttheir trespective taxes. t It twould tbe tmore tlikely tthat tthe tresult twould tbe t .
a) generalized tgrowth twith tthe tPPF tmoving tboth tup tand tto tthe tright.
b) specialized tgrowth twith tthe tPPF tmoving tboth tup tand tto tthe tright.
c) generalized tgrowth twith tthe tPPF tjust tmoving tup tand tnot tto tthe tright.
d) specialized tgrowth twith tthe tPPF tjust tmoving tup tand tnot tto tthe tright.
tExplanation: tComputer tautomation tis ta tgeneral timprovement tin ttechnology tso tit twould
timprove tall tmanufacturing. tAs ta tresult, tit twould tresult tin tgeneralized tgrowth tand tmove
tthe tPPF tboth tup tand tto tthe tright.
AACSB: tKnowledge tApplication
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-03
tTopic: tEconomic tGrowth
6. The toptimization tassumption tsuggests tthat tpeople tmake
a. irrational tdecisions.
b. unpredictable tdecisions.
c. decisions tto tmake tthemselves tas twell toff tas tpossible.
d. decisions twithout tthinking tvery thard.
Explanation: tThe toptimization tassumption tsuggests tthat tthe tperson tin tquestion tis ttrying tto
tmaximize tsome tobjective. tConsumers tare tassumed tto tbe tmaking tdecisions tthat
tmaximize ttheir thappiness tsubject tto ta tscarce tamount tof tmoney.
AACSB: tReflective tThinking
tAccessibility: tKeyboard tNavigation
tBlooms: tRemember
Difficulty: t01 tEasy
tGradeable: tautomatic
t Learning tObjective: t01-01
Topic: tThinking tEconomically
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© tMCGRAW tHILL tLLC. tALL tRIGHTS tRESERVED. tNO tREPRODUCTION tOR tDISTRIBUTION tWITHOUT tTHE
tPRIOR t WRITTEN tCONSENT tOF tMCGRAW tHILL t LLC.
