Franklyn A Plus Pass
Solution Manual oi
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
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, Franklyn A Plus Pass
Chapter 1
End of Chapter Questions
Quiz Yourself
1. Scarcity implies that the allocation decision chosen by society can
a) not make more of any one good.
b) always make more of any good.
c) typically make more of one good but at the expense of making
less of another.
d) always make more of all goods simultaneously.
Explanation: Scarcity implies that choices involve trade-
offs.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Bloom s: Understand
Difficulty: 02 Medium
Gradeable: automatic
Learning Objective: 01-01
Topic: Economics and Opportunity Cost
2. A production possibilities frontier is a simple model of
a) allocating scarce inputs to the production of alternative outputs.
a) price and production/consumption in a market.
Fr
b) the cost of producing goods.
c) the number of inputs required to produce varying levels of output.
an
Explanation: The production possibilities frontier shows the quantity of two
goods t hat can be produced. It implies that scarcity requires that choices be
made as t o how to use resources.
kl
yn
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Bloom s: Understand
e
Difficulty: 02 Medium
Gradeable: automatic
A
Learning Objective: 01-01
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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, Franklyn A Plus Pass
3. The underlying reason that there are unattainable points on a production
possibilities frontier is that there
a. is government.
b. are always choices that must be made.
c. are scarce resources within a fixed level of technology.
d. is unemployment of resources.
Explanation: The points outside the production possibilities frontier are unattainable
. This means that currently available 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: Keyboard Navigation
Bloom s: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-01
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
4. The underlying reason production possibilities frontiers are likely to be
bowed out (rather than linear) is because
a. choices have consequences.
b. there are always opportunity costs.
c. some resources and people can be better used producing one good
rather than another.
d. there is always some level of unemployment.
Explanation: If the production possibilities frontier is not a line but is bowed out
away from 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
Fr
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
an
than those moved in the previous stage. This means that the increase in pizza
product ion is diminishing and the loss in soda production is increasing. An
kl
economist would call this an example of increasing opportunity cost. If the
production possibilities frontier is a straight line that is not bowed out away
yn
from the origin, then opportunity cost is constant.
AACSB: Knowledge Application
e
Accessibility: Keyboard Navigation
Blooms: Remember
A
Difficulty: 01 Easy
Gradeable: automatic
pl
Learning Objective: 01-02
Topic: Attributes of the Production Possibilities Frontier
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Pa
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, Franklyn A Plus Pass
5. Suppose you were modeling the impact of the introduction of computer
automation into manufacturing on a production possibilities frontier (PPF) with
two manufactured goods on their respective axes. It would be more likely that the
result would be .
a) generalized growth with the PPF moving both up and to the right.
b) specialized growth with the PPF moving both up and to the right.
c) generalized growth with the PPF just moving up and not to the right.
d) specialized growth with the PPF just moving up and not to the right.
Explanation: Computer automation is a general improvement in technology so it
would improve all manufacturing. As a result, it would result in generalized
growth and move the PPF both up and to the right.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-
03 Topic: Economic Growth
6. The optimization assumption suggests that people make
a. irrational decisions.
b. unpredictable decisions.
c. decisions to make themselves as well off as possible.
d. decisions without thinking very hard.
Explanation: The optimization assumption suggests that the person in question is
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
Fr
Accessibility: Keyboard Navigation
Bloom s: Remember
an
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-01
kl
Topic: Thinking Economically
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Solution Manual oi
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
Fr
an
kl
yn
e
A
pl
us
Pa
1|Page
ss
, Franklyn A Plus Pass
Chapter 1
End of Chapter Questions
Quiz Yourself
1. Scarcity implies that the allocation decision chosen by society can
a) not make more of any one good.
b) always make more of any good.
c) typically make more of one good but at the expense of making
less of another.
d) always make more of all goods simultaneously.
Explanation: Scarcity implies that choices involve trade-
offs.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Bloom s: Understand
Difficulty: 02 Medium
Gradeable: automatic
Learning Objective: 01-01
Topic: Economics and Opportunity Cost
2. A production possibilities frontier is a simple model of
a) allocating scarce inputs to the production of alternative outputs.
a) price and production/consumption in a market.
Fr
b) the cost of producing goods.
c) the number of inputs required to produce varying levels of output.
an
Explanation: The production possibilities frontier shows the quantity of two
goods t hat can be produced. It implies that scarcity requires that choices be
made as t o how to use resources.
kl
yn
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Bloom s: Understand
e
Difficulty: 02 Medium
Gradeable: automatic
A
Learning Objective: 01-01
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
pl
us
Pa
2|Page
ss
, Franklyn A Plus Pass
3. The underlying reason that there are unattainable points on a production
possibilities frontier is that there
a. is government.
b. are always choices that must be made.
c. are scarce resources within a fixed level of technology.
d. is unemployment of resources.
Explanation: The points outside the production possibilities frontier are unattainable
. This means that currently available 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: Keyboard Navigation
Bloom s: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-01
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
4. The underlying reason production possibilities frontiers are likely to be
bowed out (rather than linear) is because
a. choices have consequences.
b. there are always opportunity costs.
c. some resources and people can be better used producing one good
rather than another.
d. there is always some level of unemployment.
Explanation: If the production possibilities frontier is not a line but is bowed out
away from 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
Fr
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
an
than those moved in the previous stage. This means that the increase in pizza
product ion is diminishing and the loss in soda production is increasing. An
kl
economist would call this an example of increasing opportunity cost. If the
production possibilities frontier is a straight line that is not bowed out away
yn
from the origin, then opportunity cost is constant.
AACSB: Knowledge Application
e
Accessibility: Keyboard Navigation
Blooms: Remember
A
Difficulty: 01 Easy
Gradeable: automatic
pl
Learning Objective: 01-02
Topic: Attributes of the Production Possibilities Frontier
us
Pa
3|Page
ss
, Franklyn A Plus Pass
5. Suppose you were modeling the impact of the introduction of computer
automation into manufacturing on a production possibilities frontier (PPF) with
two manufactured goods on their respective axes. It would be more likely that the
result would be .
a) generalized growth with the PPF moving both up and to the right.
b) specialized growth with the PPF moving both up and to the right.
c) generalized growth with the PPF just moving up and not to the right.
d) specialized growth with the PPF just moving up and not to the right.
Explanation: Computer automation is a general improvement in technology so it
would improve all manufacturing. As a result, it would result in generalized
growth and move the PPF both up and to the right.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-
03 Topic: Economic Growth
6. The optimization assumption suggests that people make
a. irrational decisions.
b. unpredictable decisions.
c. decisions to make themselves as well off as possible.
d. decisions without thinking very hard.
Explanation: The optimization assumption suggests that the person in question is
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
Fr
Accessibility: Keyboard Navigation
Bloom s: Remember
an
Difficulty: 01 Easy
Gradeable: automatic
Learning Objective: 01-01
kl
Topic: Thinking Economically
yn
e
A
pl
us
Pa
4|Page
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