Solution Manual for Issues in Economics Today 10th Edition by Robert Guell

SOLUTION MANUAL FOR
j j



IssuesjinjEconomicsjTodayj10thjEditionjbyjRobertjGuell

Chapterj1-47


Chapterj1
EndjofjChapterjQuestions
QuizjYourself

1. Scarcityjimpliesjthatjthejallocationjdecisionjchosenjbyjsocietyjcan
a) notjmakejmorejofjanyjonejgood.
b) alwaysjmakejmorejofjanyjgood.
c) typicallyjmakejmorejofjonejgoodjbutjatjthejexpensejofjmakingjlessjofja
nother.
d) alwaysjmakejmorejofjalljgoodsjsimultaneously.jExpla
nation:jScarcityjimpliesjthatjchoicesjinvolvejtrade-offs.

AACSB:jReflectivejThinkingjAccessib
ility:jKeyboardjNavigationjBlooms:jUn
derstand
Difficulty:j02jMediumjGrade
able:jautomaticjLearningjObje
ctive:j01-01
Topic:jEconomicsjandjOpportunityjCost

2. Ajproductionjpossibilitiesjfrontierjisjajsimplejmodeljof
a) allocatingjscarcejinputsjtojthejproductionjofjalternativejoutputs.
a) pricejandjproduction/consumptionjinjajmarket.
b) thejcostjofjproducingjgoods.
c) thejnumberjofjinputsjrequiredjtojproducejvaryingjlevelsjofjoutput.j Explanation:jT
hejproductionjpossibilitiesjfrontierjshowsjthejquantityjofjtwojgoodsjthatjcanjbejproduced.j
Itjimpliesjthatjscarcityjrequiresjthatjchoicesjbejmadejasjtojhowjtojusejresources.

AACSB:jReflectivejThinkingjAccessib
ility:jKeyboardjNavigationjBlooms:jUn
derstand
Difficulty:j02jMediumjGrade
able:jautomaticjLearningjObje
ctive:j01-01
Topic:jModelingjOpportunityjCostjUsingjthejProductionjPossibilitiesjFrontier


Pagej1
©jMCGRAWjHILLjLLC.jALLjRIGHTSjRESERVED.jNOjREPRODUCTIONjORjDISTRIBUTIONjWITHOUTjTHEjPRIORj
WRITTENjCONSENTjOFjMCGRAWjHILLjLLC.

,3. Thejunderlyingjreasonjthatjtherejarejunattainablejpointsjonjajproductionjpossibilitiesjfr
ontierjisjthatjthere
a. isjgovernment.
b. arejalwaysjchoicesjthatjmustjbejmade.
c. arejscarcejresourcesjwithinjajfixedjleveljofjtechnology.
d. isjunemploymentjofjresources.
Explanation:jThejpointsjoutsidejthejproductionjpossibilitiesjfrontierjarejunattainable.jThisjm
eansjthatjcurrentlyjavailablejresourcesjandjtechnologyjarejinsufficientjtojproducejamountsjg
reaterjthanjthosejillustratedjonjthejfrontier.jOnjajgraph,jeverythingjbeyondjthejfrontierjisjuna
ttainable.

AACSB:jReflectivejThinkingjAccessib
ility:jKeyboardjNavigationjBlooms:jRe
member
Difficulty:j01jEasyjGradeable
:jautomaticjLearningjObjectiv
e:j01-01
Topic:jModelingjOpportunityjCostjUsingjthejProductionjPossibilitiesjFrontier

4. Thejunderlyingjreasonjproductionjpossibilitiesjfrontiersjarejlikelyjtojbejbowedjoutj(r
atherjthanjlinear)jisjbecause
a. choicesjhavejconsequences.
b. therejarejalwaysjopportunityjcosts.
c. somejresourcesjandjpeoplejcanjbejbetterjusedjproducingjonejgoodjratherjt
hanjanother.
d. therejisjalwaysjsomejleveljofjunemployment.
Explanation:jIfjthejproductionjpossibilitiesjfrontierjisjnotjajlinejbutjisjbowedjoutjawayjfromjt
hejorigin,jthenjopportunityjcostjisjincreasing.jThejreasonjforjthisjisjthatjasjwejaddjmorejreso
urcesjtojthejproductionjof,jforjexample,jpizza,jwejarejusingjfewerjresourcesjtojproducejsoda.
jCompoundingjthatjproblem,jatjeachjstagejasjwejtakejthejresourcesjawayjfromjsodajandjputjt
hemjintojpizza,jwejarejmovingjworkersjwhojarejworsejatjpizzajproductionjandjbetterjatjsodaj
productionjthanjthosejmovedjinjthejpreviousjstage.jThisjmeansjthatjthejincreasejinjpizzajpro
ductionjisjdiminishingjandjthejlossjinjsodajproductionjisjincreasing.jAnjeconomistjwouldjcal
ljthisjanjexamplejofjincreasingjopportunityjcost.jIfjthejproductionjpossibilitiesjfrontierjisjajst
raightjlinejthatjisjnotjbowedjoutjawayjfromjthejorigin,jthenjopportunityjcostjisjconstant.

AACSB:jKnowledgejApplicationjAcce
ssibility:jKeyboardjNavigationjBlooms:
jRemember
Difficulty:j01jEasyjGradeable
:jautomaticjLearningjObjectiv
e:j01-02
Topic:jAttributesjofjthejProductionjPossibilitiesjFrontier




Pagej2
©jMCGRAWjHILLjLLC.jALLjRIGHTSjRESERVED.jNOjREPRODUCTIONjORjDISTRIBUTIONjWITHOUTjTHEjPRIORj
WRITTENjCONSENTjOFjMCGRAWjHILLjLLC.

,5. Supposejyoujwerejmodelingjthejimpactjofjthejintroductionjofjcomputerjautomationjin
tojmanufacturingjonjajproductionjpossibilitiesjfrontierj(PPF)jwithjtwojmanufacturedjgood
sjonjtheirjrespectivejaxes.jItjwouldjbejmorejlikelyjthatjthejresultjwouldjbej .
a) generalizedjgrowthjwithjthejPPFjmovingjbothjupjandjtojthejright.
b) specializedjgrowthjwithjthejPPFjmovingjbothjupjandjtojthejright.
c) generalizedjgrowthjwithjthejPPFjjustjmovingjupjandjnotjtojthejright.
d) specializedjgrowthjwithjthejPPFjjustjmovingjupjandjnotjtojthejright.jExplanation:j
Computerjautomationjisjajgeneraljimprovementjinjtechnologyjsojitjwouldjimprovejalljma
nufacturing.jAsjajresult,jitjwouldjresultjinjgeneralizedjgrowthjandjmovejthejPPFjbothjupja
ndjtojthejright.

AACSB:jKnowledgejApplicationjAcce
ssibility:jKeyboardjNavigationjBlooms:
jRemember
Difficulty:j01jEasyjGradeable
:jautomaticjLearningjObjectiv
e:j01-
03jTopic:jEconomicjGrowth

6. Thejoptimizationjassumptionjsuggestsjthatjpeoplejmake
a. irrationaljdecisions.
b. unpredictablejdecisions.
c. decisionsjtojmakejthemselvesjasjwelljoffjasjpossible.
d. decisionsjwithoutjthinkingjveryjhard.
Explanation:jThejoptimizationjassumptionjsuggestsjthatjthejpersonjinjquestionjisjtryingjtoj
maximizejsomejobjective.jConsumersjarejassumedjtojbejmakingjdecisionsjthatjmaximizejt
heirjhappinessjsubjectjtojajscarcejamountjofjmoney.

AACSB:jReflectivejThinkingjAccessib
ility:jKeyboardjNavigationjBlooms:jRe
member
Difficulty:j01jEasyjGradeable
:jautomaticjLearningjObjectiv
e:j01-01
Topic:jThinkingjEconomically

7. Imaginejanjeconomistjorderingjdonutsjone-by-
one.jWhenjdecidingjhowjmanyjdonutsjtojorderjtheyjwouldjpickjthatjnumberjwherejthejenjoy
mentjofjthej
equalsjthejenjoymentjtheyjcouldjgetjfromjusingjthejmoneyjonjanotherjgood.
a. firstjdonut
b. last/marginaljdonut
c. average/typicaljdonut
d. totaljnumberjofjdonuts
Explanation:jThejenjoymentjofjthejlastjslicejisjthejmarginaljbenefitjofjthatjslice.jIfjthisjenjoymen
tjisjmorejthanjthejenjoymentjfromjsomejalternative,jmorejwilljbejconsumed.

AACSB:jReflectivejThinking
Pagej3
©jMCGRAWjHILLjLLC.jALLjRIGHTSjRESERVED.jNOjREPRODUCTIONjORjDISTRIBUTIONjWITHOUTjTHEjPRIORj
WRITTENjCONSENTjOFjMCGRAWjHILLjLLC.

, Accessibility:jKeyboardjNavigationjBl
ooms:jUnderstand
Difficulty:j02jMediumjGradea
ble:jautomaticj LearningjObjec
tive:j01-
04jTopic:jThinkingjEconomica
lly

8. Ofjcourse,jalljindividualjstudentsjarejbetterjoffjifjtheyjearnjbetterjgrades.jIfjyoujwerejtoj
concludejthatjalljstudentsjwouldjbejbetterjoffjifjeveryonejreceivedjanjA,jyoujwould
a. havejfallenjvictimjtojthejfallacyjofjscarcity.
b. bejright.
c. havejfallenjvictimjtojthejfallacyjofjcomposition.
d. bejmistakingjcorrelationjwithjcausation.
Explanation:jThejfallacyjofjcompositionjisjthejmistakejinjlogicjthatjsuggestsjthatjthejtotaljeco
nomicjimpactjofjsomethingjisjalwaysjandjsimplyjequaljtojthejsumjofjthejindividualjparts.

AACSB:jReflectivejThinkingjAccessib
ility:jKeyboardjNavigationjBlooms:jUn
derstand
Difficulty:j02jMediumjGradea
ble:jautomaticj LearningjObjec
tive:j01-
04jTopic:jThinkingjEconomica
lly

9. Imaginejyoujwerejtojconclude,jafterjcarefullyjexaminingjdatajandjusingjproperjevaluati
onjtechniques,jthatjajtaxjcreditjforjattendingjcollegejbenefitsjlowjincomejearnersjmorejthanj
ajtaxjdeductionj(ofjequaljtotaljcostjtojthejgovernment)jwould.jYoujwouldjhavejengagedjinj
analysisjtojreachjthatjconclusion.
a. negative
b. positive
c. normative
d. creative
Explanation:jEconomists,jandjsocialjscientistsjinjgeneral,jdistinguishjviewsjofj―thejwayjthin
gsjare‖jfromj―thejwayjthingsjshouldjbe,‖jcallingjthejformerjpositivejanalysisjandjthejlatterjno
rmativejanalysis.jPositivejanalysisjisjajformjofjanalysisjthatjseeksjtojunderstandjthejwayjthin
gsjarejandjwhyjtheyjarejthatjway.jNormativejanalysisjisjajformjofjanalysisjthatjseeksjtojunder
standjthejwayjthingsjshouldjbe.

AACSB:jReflectivejThinkingjAccessib
ility:jKeyboardjNavigationjBlooms:jUn
derstand
Difficulty:j02jMediumjGradea
ble:jautomaticj LearningjObjec
tive:j01-
04jTopic:jThinkingjEconomica
lly
Pagej4
©jMCGRAWjHILLjLLC.jALLjRIGHTSjRESERVED.jNOjREPRODUCTIONjORjDISTRIBUTIONjWITHOUTjTHEjPRIORj
WRITTENjCONSENTjOFjMCGRAWjHILLjLLC.