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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
100|00P00a00g00
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, Chapter 1 00
End of Chapter Questions
00 00 00
Quiz0 0 Yourself
1. Scarcity0 0 implies0 0 that0 0 the0 0 allocation0 0 decision0 0 chosen0 0 by0 0 society0 0 can
a) not0 0 make0 0 more0 0 of0 0 any0 0 one0 0 good.
b) always0 0 make0 0 more0 0 of0 0 any0 0 good.
c) typically0 0 make0 0 more0 0 of0 0 one0 0 good0 0 but0 0 at0 0 the0 0 expense0 0 o
f0 0 making00less0 0 of0 0 another.
d) always0 0 make0 0 more0 0 of0 0 all0 0 goods0 0 simultaneo
usly.00Explanation:0 0 Scarcity00implies0 0 that0 0 choices0 0 inv
olve0 0 trade-00offs.
AACSB:00Reflective00Thinking00Acces
sibility:00Keyboard00Navigation00Bloo
m00s:0 0 Understand
Difficulty:000200Medium00Gra
deable:
automatic
00Learning00Objective:0 0 01-
01
Topic:0 0 Economics0 0 and0 0 Opportunity0 0 Cost
2. A0 0 production0 0 possibilities0 0 frontier0 0 is0 0 a0 0 simple0 0 model0 0 of
a) allocating0 0 scarce0 0 inputs0 0 to0 0 the0 0 production0 0 of0 0 alternative0 0 outputs.
a) price0 0 and0 0 production/consumption0 0 in0 0 a0 0 market.
b) the0 0 cost0 0 of0 0 producing0 0 goods.
c) the00number00of00inputs00required00to00produce00varying00levels00of00output.0 0 Exp
lanation:0 0 The0 0 production0 0 possibilities0 0 frontier0 0 shows0 0 the0 0 quantity0 0 of0 0 two0
0 goods0 0 t00hat0 0 can0 0 be0 0 produced.0 0 It0 0 implies0 0 that0 0 scarcity0 0 requires0 0 that0 0 c
hoices0 0 be00made0 0 as0 0 t00o0 0 how0 0 to0 0 use0 0 resources.
AACSB:00Reflective00Thinking00Acces
sibility:00Keyboard00Navigation00Bloo
m00s:0 0 Understand
Difficulty:000200Medium00Gra
deable:
automatic
00Learning00Objective:0 0 01-
01
Topic:0 0 Modeling0 0 Opportunity0 0 Cost0 0 Using0 0 the0 0 Production0 0 Possibilities0 0 Frontier
200|00P00a00g00
e
,3. The0 0 underlying0 0 reason0 0 that0 0 there0 0 are0 0 unattainable0 0 points0 0 on0 0 a0 0 p
roduction00possibilities0 0 frontier0 0 is0 0 that0 0 there
a. is0 0 government.
b. are0 0 always0 0 choices0 0 that0 0 must0 0 be0 0 made.
c. are0 0 scarce0 0 resources0 0 within0 0 a0 0 fixed0 0 level0 0 of0 0 technology.
d. is0 0 unemployment0 0 of0 0 resources.
Explanation:0 0 The0 0 points0 0 outside0 0 the0 0 production0 0 possibilities0 0 frontier0 0 are0 0 unattainab
le
.0 0 This0 0 means0 0 that0 0 currently0 0 available0 0 resources0 0 and0 0 technology0 0 are0 0 insuff
icient0 0 to00produce0 0 amounts0 0 greater0 0 than0 0 those0 0 illustrated0 0 on0 0 the0 0 frontier.0 0
On0 0 a0 0 graph,00everything0 0 beyond0 0 the0 0 frontier0 0 is0 0 unattainable.
AACSB:00Reflective00Thinking00Acces
sibility:00Keyboard00Navigation00Bloo
m00s:0 0 Remember
Difficulty:000100Easy00Gradea
ble:
automatic
00Learning00Objective:0 0 01-
01
Topic:0 0 Modeling0 0 Opportunity0 0 Cost0 0 Using0 0 the0 0 Production0 0 Possibilities0 0 Frontier
4. The0 0 underlying0 0 reason0 0 production0 0 possibilities0 0 frontiers0 0 are0 0 likel
y0 0 to0 0 be00bowed0 0 out0 0 (rather0 0 than0 0 linear)0 0 is0 0 because
a. choices0 0 have0 0 consequences.
b. there0 0 are0 0 always0 0 opportunity0 0 costs.
c. some0 0 resources0 0 and0 0 people0 0 can0 0 be0 0 better0 0 used0 0 producing0 0 o
ne0 0 good00rather0 0 than0 0 another.
d. there0 0 is0 0 always0 0 some0 0 level0 0 of0 0 unemployment.
Explanation:0 0 If0 0 the0 0 production0 0 possibilities0 0 frontier0 0 is0 0 not0 0 a0 0 line0 0 but0 0 is0 0 b
owed0 0 out00away0 0 from0 0 the0 0 origin,0 0 then0 0 opportunity0 0 cost0 0 is0 0 increasing.0 0
The0 0 reason0 0 for0 0 this0 0 is00that0 0 as0 0 we0 0 add0 0 more0 0 resources0 0 to0 0 the0 0 pro
duction0 0 of,0 0 for0 0 example,0 0 pizza,0 0 we0 0 are00using0 0 fewer0 0 resources0 0 to0 0 prod
uce0 0 soda.0 0 Compounding0 0 that0 0 problem,0 0 at0 0 each0 0 stage00as0 0 we0 0 take0 0 the0
0 resources0 0 away0 0 from0 0 soda0 0 and0 0 put0 0 them0 0 into0 0 pizza,0 0 we0 0 are00movi
ng0 0 workers0 0 who0 0 are0 0 worse0 0 at0 0 pizza0 0 production0 0 and0 0 better0 0 at0 0 soda0 0 produ
ction00than0 0 those0 0 moved0 0 in0 0 the0 0 previous0 0 stage.0 0 This0 0 means0 0 that0 0 the0 0
increase0 0 in0 0 pizza00product00ion0 0 is0 0 diminishing0 0 and0 0 the0 0 loss0 0 in0 0 soda0 0 producti
on0 0 is0 0 increasing.0 0 An00economist0 0 would0 0 call0 0 this0 0 an0 0 example0 0 of0 0 increasing0 0
opportunity0 0 cost.0 0 If0 0 the00production0 0 possibilities0 0 frontier0 0 is0 0 a0 0 straight0 0 lin
e0 0 that0 0 is0 0 not0 0 bowed0 0 out0 0 away00from0 0 the0 0 origin,0 0 then00opportunity0 0 cost0
0 is0 0 constant.
AACSB:00Knowledge00Application00A
ccessibility:00Keyboard00Navigation00B
looms:0 0 Remember
Difficulty:000100Easy00Gradea
ble:
300|00P00a00g00
e
, automatic
00Learning00Objective:0 0 01-
02
Topic:0 0 Attributes0 0 of0 0 the0 0 Production0 0 Possibilities0 0 Frontier
400|00P00a00g00
e
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
100|00P00a00g00
e
, Chapter 1 00
End of Chapter Questions
00 00 00
Quiz0 0 Yourself
1. Scarcity0 0 implies0 0 that0 0 the0 0 allocation0 0 decision0 0 chosen0 0 by0 0 society0 0 can
a) not0 0 make0 0 more0 0 of0 0 any0 0 one0 0 good.
b) always0 0 make0 0 more0 0 of0 0 any0 0 good.
c) typically0 0 make0 0 more0 0 of0 0 one0 0 good0 0 but0 0 at0 0 the0 0 expense0 0 o
f0 0 making00less0 0 of0 0 another.
d) always0 0 make0 0 more0 0 of0 0 all0 0 goods0 0 simultaneo
usly.00Explanation:0 0 Scarcity00implies0 0 that0 0 choices0 0 inv
olve0 0 trade-00offs.
AACSB:00Reflective00Thinking00Acces
sibility:00Keyboard00Navigation00Bloo
m00s:0 0 Understand
Difficulty:000200Medium00Gra
deable:
automatic
00Learning00Objective:0 0 01-
01
Topic:0 0 Economics0 0 and0 0 Opportunity0 0 Cost
2. A0 0 production0 0 possibilities0 0 frontier0 0 is0 0 a0 0 simple0 0 model0 0 of
a) allocating0 0 scarce0 0 inputs0 0 to0 0 the0 0 production0 0 of0 0 alternative0 0 outputs.
a) price0 0 and0 0 production/consumption0 0 in0 0 a0 0 market.
b) the0 0 cost0 0 of0 0 producing0 0 goods.
c) the00number00of00inputs00required00to00produce00varying00levels00of00output.0 0 Exp
lanation:0 0 The0 0 production0 0 possibilities0 0 frontier0 0 shows0 0 the0 0 quantity0 0 of0 0 two0
0 goods0 0 t00hat0 0 can0 0 be0 0 produced.0 0 It0 0 implies0 0 that0 0 scarcity0 0 requires0 0 that0 0 c
hoices0 0 be00made0 0 as0 0 t00o0 0 how0 0 to0 0 use0 0 resources.
AACSB:00Reflective00Thinking00Acces
sibility:00Keyboard00Navigation00Bloo
m00s:0 0 Understand
Difficulty:000200Medium00Gra
deable:
automatic
00Learning00Objective:0 0 01-
01
Topic:0 0 Modeling0 0 Opportunity0 0 Cost0 0 Using0 0 the0 0 Production0 0 Possibilities0 0 Frontier
200|00P00a00g00
e
,3. The0 0 underlying0 0 reason0 0 that0 0 there0 0 are0 0 unattainable0 0 points0 0 on0 0 a0 0 p
roduction00possibilities0 0 frontier0 0 is0 0 that0 0 there
a. is0 0 government.
b. are0 0 always0 0 choices0 0 that0 0 must0 0 be0 0 made.
c. are0 0 scarce0 0 resources0 0 within0 0 a0 0 fixed0 0 level0 0 of0 0 technology.
d. is0 0 unemployment0 0 of0 0 resources.
Explanation:0 0 The0 0 points0 0 outside0 0 the0 0 production0 0 possibilities0 0 frontier0 0 are0 0 unattainab
le
.0 0 This0 0 means0 0 that0 0 currently0 0 available0 0 resources0 0 and0 0 technology0 0 are0 0 insuff
icient0 0 to00produce0 0 amounts0 0 greater0 0 than0 0 those0 0 illustrated0 0 on0 0 the0 0 frontier.0 0
On0 0 a0 0 graph,00everything0 0 beyond0 0 the0 0 frontier0 0 is0 0 unattainable.
AACSB:00Reflective00Thinking00Acces
sibility:00Keyboard00Navigation00Bloo
m00s:0 0 Remember
Difficulty:000100Easy00Gradea
ble:
automatic
00Learning00Objective:0 0 01-
01
Topic:0 0 Modeling0 0 Opportunity0 0 Cost0 0 Using0 0 the0 0 Production0 0 Possibilities0 0 Frontier
4. The0 0 underlying0 0 reason0 0 production0 0 possibilities0 0 frontiers0 0 are0 0 likel
y0 0 to0 0 be00bowed0 0 out0 0 (rather0 0 than0 0 linear)0 0 is0 0 because
a. choices0 0 have0 0 consequences.
b. there0 0 are0 0 always0 0 opportunity0 0 costs.
c. some0 0 resources0 0 and0 0 people0 0 can0 0 be0 0 better0 0 used0 0 producing0 0 o
ne0 0 good00rather0 0 than0 0 another.
d. there0 0 is0 0 always0 0 some0 0 level0 0 of0 0 unemployment.
Explanation:0 0 If0 0 the0 0 production0 0 possibilities0 0 frontier0 0 is0 0 not0 0 a0 0 line0 0 but0 0 is0 0 b
owed0 0 out00away0 0 from0 0 the0 0 origin,0 0 then0 0 opportunity0 0 cost0 0 is0 0 increasing.0 0
The0 0 reason0 0 for0 0 this0 0 is00that0 0 as0 0 we0 0 add0 0 more0 0 resources0 0 to0 0 the0 0 pro
duction0 0 of,0 0 for0 0 example,0 0 pizza,0 0 we0 0 are00using0 0 fewer0 0 resources0 0 to0 0 prod
uce0 0 soda.0 0 Compounding0 0 that0 0 problem,0 0 at0 0 each0 0 stage00as0 0 we0 0 take0 0 the0
0 resources0 0 away0 0 from0 0 soda0 0 and0 0 put0 0 them0 0 into0 0 pizza,0 0 we0 0 are00movi
ng0 0 workers0 0 who0 0 are0 0 worse0 0 at0 0 pizza0 0 production0 0 and0 0 better0 0 at0 0 soda0 0 produ
ction00than0 0 those0 0 moved0 0 in0 0 the0 0 previous0 0 stage.0 0 This0 0 means0 0 that0 0 the0 0
increase0 0 in0 0 pizza00product00ion0 0 is0 0 diminishing0 0 and0 0 the0 0 loss0 0 in0 0 soda0 0 producti
on0 0 is0 0 increasing.0 0 An00economist0 0 would0 0 call0 0 this0 0 an0 0 example0 0 of0 0 increasing0 0
opportunity0 0 cost.0 0 If0 0 the00production0 0 possibilities0 0 frontier0 0 is0 0 a0 0 straight0 0 lin
e0 0 that0 0 is0 0 not0 0 bowed0 0 out0 0 away00from0 0 the0 0 origin,0 0 then00opportunity0 0 cost0
0 is0 0 constant.
AACSB:00Knowledge00Application00A
ccessibility:00Keyboard00Navigation00B
looms:0 0 Remember
Difficulty:000100Easy00Gradea
ble:
300|00P00a00g00
e
, automatic
00Learning00Objective:0 0 01-
02
Topic:0 0 Attributes0 0 of0 0 the0 0 Production0 0 Possibilities0 0 Frontier
400|00P00a00g00
e
