,Solution manual for Microeconomics , 14th Edition
Roger A. Arnold
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Solution’s Manual
Arnold, Economics, 14e; Chapter 1: What Economics Is About
Table of Contents
Content Grid.....................................................................................................................................2
Chapter 1: What Economics is About..............................................................................................5
Answers to Chapter Questions and Problems..........................................................................................5
Answers to Problems in the Working With Numbers and Graphs Section.............................................14
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Content Grid
ECONOMICS MACRO MICRO
An Introduction to Economics
Part I Economics: The Science of Scarcity Part 1 Part 1
Chapter 1 What Economics Is About 1 1
Appendix A Working with Diagrams A A
Appendix B Should You Major in Economics? B B
Chapter 2 Production Possibilities Frontier 2 2
Chapter 3 Supply and Demand: Theory 3 3
Chapter 4 Prices: Free, Controlled, and Relative 4 4
Chapter 5 Supply, Demand, and Price: Applications 5 5
Part 2 Macroeconomic Fundamentals Part 2
Chapter 6 Macroeconomic Measurements, Part I: Prices and 6
Unemployment
Chapter 7 Macroeconomic Measurements, Part II: GDP and Real 7
GDP
Part 3 Macroeconomic Stability, Instability, and Fiscal Policy Part 3
Chapter 8 Aggregate Demand and Aggregate Supply 8
Chapter 9 Classical Macroeconomics and the Self-Regulating 9
Economy
Chapter 10 Keynesian Macroeconomics and Economic Instability: 10
A Critique of the Self-Regulating Economy
Chapter 11 Fiscal Policy and the Federal 11
Part 4 Money, the Economy, and Monetary Policy Part 4
Chapter 12 Money, Banking, and the Financial System 12
Chapter 13 The Federal Reserve System 13
Chapter 14 Money and the Economy 14
Chapter 15 Monetary Policy 15
Appendix C: Bond Prices and Interest Rates C
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Part 5 Expectations and Growth Part 5
Chapter 16 Expectations Theory and the Economy 16
Chapter 17 Economic Growth: Resources, Technology, Ideas, and 17
Institutions
Part 6 Creative Destruction and Crony Capitalism Part 6 Part 6
Chapter 18 Creative Destruction and Crony Capitalism: Two 18 20
Forces on the Economic Landscape Today
MICROECONOMICS Part 2
Part 7 Microeconomic Fundamentals
Chapter 19 Elasticity 6
Chapter 20 Consumer Choice: Maximizing Utility and Behavioral 7
Economics
Appendix D Budget Constraint and Indifference Curve Analysis
C
Chapter 21 Production and Costs 8
Part 8 Product Markets and Policies Part 3
Chapter 22 Perfect Competition 9
Chapter 23 Monopoly 10
Chapter 24 Monopolistic Competition, Oligopoly, and Game 11
Theory
Chapter 25 Government and Product Markets: Antitrust and 12
Regulation
Part 9 Factor Markets and Related Issues Part 4
Chapter 26 Factor Markets: With Emphasis on the Labor Market 13
Chapter 27 Wages, Unions, and Labor 14
Chapter 28 The Distribution of Income and Poverty 15
Chapter 29 Interest, Rent, and Profit 16
Part 10 Health Economics Part 5
Chapter 30 Health Economics 17
Part 11 Market Failure, Public Choice, and Special-Interest Part 6
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Group Politics
Part 11 Public Choice and Special-Interest-Group Politics
Chapter 31 Market Failure: Externalities, Public Goods, and 18
Asymmetric Information
Chapter 32 Public Choice and Special-Interest-Group Politics 19
Part 12 Economic Theories and Research Part 7 Part 7
Chapter 33 New Frontiers in Economic Research: Casual 19 21
Inference and Machine Learning
The Global Economy Part 8 Part 8
Part 13 International Trade and Finance
Chapter 34 International Trade 20 22
Chapter 35 International Finance 21 23
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Chapter 1: What Economics is About
Answers to Chapter Questions and Problems
1. The United States is considered a rich country because Americans can choose
from an abundance of goods and services. How can there be scarcity in a land
of abundance?
Abundance does not imply unlimited resources. No one has unlimited money and time, so
everyone must constantly make choices. This is the fundamental basis of scarcity. Even in a
land of abundance, wants exceed the resources available to meet those wants.
2. Give two examples for each of the following: (a) an intangible good, (b) a
tangible good, (c) a bad.
Answers will vary.
a) Intangible goods are those that have no concrete existence, such as friendship or an
economics lecture.
b) Tangible goods are concrete goods that can be exchanged and reproduced more
easily than intangible goods, such as a videotape of an economics lecture or a cell
phone.
c) Bads are goods that provide disutility. Examples are pollution, the noise produced
by planes taking off at an airport, or the smell a skunk produces, etc.
3. Give an example of something that is a good for one person and a bad for
someone else.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Answers will vary.
4. What is the difference between labor as a resource and entrepreneurship as a
resource?
Labor consists of the physical and mental talents people contribute to the existing production
process, while entrepreneurship refers to creatively seeking new business opportunities and
new ways to organize production and developing new ways of doing things.
5. Can either scarcity or one of the effects of scarcity be found in a car
dealership? Explain your answer.
Answers will vary. One example is that the resources used to produce a car sold in the
dealership could have been used to produce a different good.
6. Explain the link between scarcity and each of the following: (a) choice, (b)
opportunity cost, (c) the need for a rationing device, (d) competition.
a) Because there is scarcity, individuals have to choose between the different goods
that they have the opportunity to consume.
b) In choosing between different goods, individuals face an opportunity cost. When
they decide to choose one good (go to a baseball game), they give up the
opportunity to consume another good (see a movie).
c) Because wants exceed resources, some method for allocating scarce resources is
necessary. Although there are many rationing devices, the most common one used
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
in economic transactions is the price mechanism, which defines how much of one
resource (money) an individual must give up in order to obtain another resource.
d) Because resources are limited, people compete with one another both to obtain the
resources they need to purchase the limited resources, and to get the resources
that are available. This process is called competition.
7. Is it possible for a person to incur an opportunity cost without spending any
money? Explain.
Yes. An opportunity cost occurs when an individual gives up any resource when making a
choice. An example would be leisure time. When students study for an exam, the opportunity
cost is the time they could have spent watching a movie or listening to music. Of course, not
studying for the exam could also have an opportunity cost—flunking the course.
8. Discuss the opportunity costs of attending college for four years. Is college
more or less costly than you thought it was? Explain.
Answers will vary. Students should include the cost of tuition, fees, and supplies that they
purchase only because they are enrolled in college. They should also include that portion
of room and board that they would not have spent had they not matriculated,
remembering that, had they not enrolled in college, they would still have to eat and sleep
somewhere. Finally, they should consider the opportunity cost of the time they spend in
college. For example, suppose that Suzie has the following choices: she can go to college
for the year, she can spend the entire year relaxing in leisure, she can take a job paying
$25,000 a year as a legal secretary for a hometown law firm, or she can take a job with
the Peace Corps in Africa, earning $17,000. If she decides that the best alternative use
of her time would be to take a job paying $25,000 a year as a legal secretary, the
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 7
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
opportunity cost of going to college will include the $25,000 that Susie foregoes. Once
students include their opportunity costs, they find that college is considerably more
expensive than they thought it was when they only considered out-of-pocket expenses.
9. Explain the relationship between changes in opportunity cost and changes in
behavior.
To the extent that opportunity costs determine behavior by identifying those activities
and goods that are “worth” making “sacrifices” for and those that aren’t, as opportunity
costs change so will a rational consumer’s assessment of various options. For example,
suppose that Becky, a high school graduate, is currently working as a model and is
earning $25,000 per year. In order to go to college, she would have to cut back on her
modeling, reducing her annual income to $10,000. Further, suppose that tuition, books,
and fees at the college of Becky’s choice total $15,000 per year. In deciding whether to
quit modeling full-time and go to college, Becky is faced with balancing a present
opportunity cost of $30,000, ceteris paribus, against the future benefits of a college
education. Now, suppose that Becky earns a scholarship that will reduce her tuition,
books, and fees bill to $5,000 per year, thus reducing her present opportunity cost to
$20,000. While this may not change Becky’s mind (she may have already decided to
accept the present burden for the future benefit), such a change in opportunity cost
would certainly weigh in favor of going to college.
10. Owen says that we should eliminate all pollution in the world. William
disagrees. Who is more likely to be an economist, Owen or William? Explain
your answer.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 8
website, in whole or in part.
Roger A. Arnold
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Solution’s Manual
Arnold, Economics, 14e; Chapter 1: What Economics Is About
Table of Contents
Content Grid.....................................................................................................................................2
Chapter 1: What Economics is About..............................................................................................5
Answers to Chapter Questions and Problems..........................................................................................5
Answers to Problems in the Working With Numbers and Graphs Section.............................................14
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Content Grid
ECONOMICS MACRO MICRO
An Introduction to Economics
Part I Economics: The Science of Scarcity Part 1 Part 1
Chapter 1 What Economics Is About 1 1
Appendix A Working with Diagrams A A
Appendix B Should You Major in Economics? B B
Chapter 2 Production Possibilities Frontier 2 2
Chapter 3 Supply and Demand: Theory 3 3
Chapter 4 Prices: Free, Controlled, and Relative 4 4
Chapter 5 Supply, Demand, and Price: Applications 5 5
Part 2 Macroeconomic Fundamentals Part 2
Chapter 6 Macroeconomic Measurements, Part I: Prices and 6
Unemployment
Chapter 7 Macroeconomic Measurements, Part II: GDP and Real 7
GDP
Part 3 Macroeconomic Stability, Instability, and Fiscal Policy Part 3
Chapter 8 Aggregate Demand and Aggregate Supply 8
Chapter 9 Classical Macroeconomics and the Self-Regulating 9
Economy
Chapter 10 Keynesian Macroeconomics and Economic Instability: 10
A Critique of the Self-Regulating Economy
Chapter 11 Fiscal Policy and the Federal 11
Part 4 Money, the Economy, and Monetary Policy Part 4
Chapter 12 Money, Banking, and the Financial System 12
Chapter 13 The Federal Reserve System 13
Chapter 14 Money and the Economy 14
Chapter 15 Monetary Policy 15
Appendix C: Bond Prices and Interest Rates C
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Part 5 Expectations and Growth Part 5
Chapter 16 Expectations Theory and the Economy 16
Chapter 17 Economic Growth: Resources, Technology, Ideas, and 17
Institutions
Part 6 Creative Destruction and Crony Capitalism Part 6 Part 6
Chapter 18 Creative Destruction and Crony Capitalism: Two 18 20
Forces on the Economic Landscape Today
MICROECONOMICS Part 2
Part 7 Microeconomic Fundamentals
Chapter 19 Elasticity 6
Chapter 20 Consumer Choice: Maximizing Utility and Behavioral 7
Economics
Appendix D Budget Constraint and Indifference Curve Analysis
C
Chapter 21 Production and Costs 8
Part 8 Product Markets and Policies Part 3
Chapter 22 Perfect Competition 9
Chapter 23 Monopoly 10
Chapter 24 Monopolistic Competition, Oligopoly, and Game 11
Theory
Chapter 25 Government and Product Markets: Antitrust and 12
Regulation
Part 9 Factor Markets and Related Issues Part 4
Chapter 26 Factor Markets: With Emphasis on the Labor Market 13
Chapter 27 Wages, Unions, and Labor 14
Chapter 28 The Distribution of Income and Poverty 15
Chapter 29 Interest, Rent, and Profit 16
Part 10 Health Economics Part 5
Chapter 30 Health Economics 17
Part 11 Market Failure, Public Choice, and Special-Interest Part 6
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Group Politics
Part 11 Public Choice and Special-Interest-Group Politics
Chapter 31 Market Failure: Externalities, Public Goods, and 18
Asymmetric Information
Chapter 32 Public Choice and Special-Interest-Group Politics 19
Part 12 Economic Theories and Research Part 7 Part 7
Chapter 33 New Frontiers in Economic Research: Casual 19 21
Inference and Machine Learning
The Global Economy Part 8 Part 8
Part 13 International Trade and Finance
Chapter 34 International Trade 20 22
Chapter 35 International Finance 21 23
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Chapter 1: What Economics is About
Answers to Chapter Questions and Problems
1. The United States is considered a rich country because Americans can choose
from an abundance of goods and services. How can there be scarcity in a land
of abundance?
Abundance does not imply unlimited resources. No one has unlimited money and time, so
everyone must constantly make choices. This is the fundamental basis of scarcity. Even in a
land of abundance, wants exceed the resources available to meet those wants.
2. Give two examples for each of the following: (a) an intangible good, (b) a
tangible good, (c) a bad.
Answers will vary.
a) Intangible goods are those that have no concrete existence, such as friendship or an
economics lecture.
b) Tangible goods are concrete goods that can be exchanged and reproduced more
easily than intangible goods, such as a videotape of an economics lecture or a cell
phone.
c) Bads are goods that provide disutility. Examples are pollution, the noise produced
by planes taking off at an airport, or the smell a skunk produces, etc.
3. Give an example of something that is a good for one person and a bad for
someone else.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
Answers will vary.
4. What is the difference between labor as a resource and entrepreneurship as a
resource?
Labor consists of the physical and mental talents people contribute to the existing production
process, while entrepreneurship refers to creatively seeking new business opportunities and
new ways to organize production and developing new ways of doing things.
5. Can either scarcity or one of the effects of scarcity be found in a car
dealership? Explain your answer.
Answers will vary. One example is that the resources used to produce a car sold in the
dealership could have been used to produce a different good.
6. Explain the link between scarcity and each of the following: (a) choice, (b)
opportunity cost, (c) the need for a rationing device, (d) competition.
a) Because there is scarcity, individuals have to choose between the different goods
that they have the opportunity to consume.
b) In choosing between different goods, individuals face an opportunity cost. When
they decide to choose one good (go to a baseball game), they give up the
opportunity to consume another good (see a movie).
c) Because wants exceed resources, some method for allocating scarce resources is
necessary. Although there are many rationing devices, the most common one used
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
in economic transactions is the price mechanism, which defines how much of one
resource (money) an individual must give up in order to obtain another resource.
d) Because resources are limited, people compete with one another both to obtain the
resources they need to purchase the limited resources, and to get the resources
that are available. This process is called competition.
7. Is it possible for a person to incur an opportunity cost without spending any
money? Explain.
Yes. An opportunity cost occurs when an individual gives up any resource when making a
choice. An example would be leisure time. When students study for an exam, the opportunity
cost is the time they could have spent watching a movie or listening to music. Of course, not
studying for the exam could also have an opportunity cost—flunking the course.
8. Discuss the opportunity costs of attending college for four years. Is college
more or less costly than you thought it was? Explain.
Answers will vary. Students should include the cost of tuition, fees, and supplies that they
purchase only because they are enrolled in college. They should also include that portion
of room and board that they would not have spent had they not matriculated,
remembering that, had they not enrolled in college, they would still have to eat and sleep
somewhere. Finally, they should consider the opportunity cost of the time they spend in
college. For example, suppose that Suzie has the following choices: she can go to college
for the year, she can spend the entire year relaxing in leisure, she can take a job paying
$25,000 a year as a legal secretary for a hometown law firm, or she can take a job with
the Peace Corps in Africa, earning $17,000. If she decides that the best alternative use
of her time would be to take a job paying $25,000 a year as a legal secretary, the
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 7
website, in whole or in part.
, Solution Manual: Arnold, Economics, 14e; Chapter 1: What Economics Is About
opportunity cost of going to college will include the $25,000 that Susie foregoes. Once
students include their opportunity costs, they find that college is considerably more
expensive than they thought it was when they only considered out-of-pocket expenses.
9. Explain the relationship between changes in opportunity cost and changes in
behavior.
To the extent that opportunity costs determine behavior by identifying those activities
and goods that are “worth” making “sacrifices” for and those that aren’t, as opportunity
costs change so will a rational consumer’s assessment of various options. For example,
suppose that Becky, a high school graduate, is currently working as a model and is
earning $25,000 per year. In order to go to college, she would have to cut back on her
modeling, reducing her annual income to $10,000. Further, suppose that tuition, books,
and fees at the college of Becky’s choice total $15,000 per year. In deciding whether to
quit modeling full-time and go to college, Becky is faced with balancing a present
opportunity cost of $30,000, ceteris paribus, against the future benefits of a college
education. Now, suppose that Becky earns a scholarship that will reduce her tuition,
books, and fees bill to $5,000 per year, thus reducing her present opportunity cost to
$20,000. While this may not change Becky’s mind (she may have already decided to
accept the present burden for the future benefit), such a change in opportunity cost
would certainly weigh in favor of going to college.
10. Owen says that we should eliminate all pollution in the world. William
disagrees. Who is more likely to be an economist, Owen or William? Explain
your answer.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 8
website, in whole or in part.
