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

SOLUTION MANUAL FOR x x




Issues in Economics Today 10th Edition by Robert Guell
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Chapter 1-47 x




Chapter 1 x




End of Chapter Questions
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Quiz Yourself
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1. Scarcity implies that the allocation decision chosen by society can
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a) not make more of any one good. x x x x x x


b) always make more of any good. x x x x x


c) typically make more of one good but at the expense of making less of
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another. x


d) always make more of all goods simultaneously. x x x x x x


Explanation: Scarcity implies that choices involve trade-
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offs.

AACSB: Reflective Thinking x x


Accessibility: Keyboard
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NavigationBlooms: Understand
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Difficulty: 02 Medium x x


Gradeable: automatic
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Learning Objective: 01-
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01
Topic: Economics and Opportunity Cost
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2. A production possibilities frontier is a simple model of
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a) allocating scarce inputs to the production of alternative outputs.
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a) price and production/consumption in a market.
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b) the cost of producing goods. x x x x


c) the number of inputs required to produce varying levels of output.
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x Explanation: The production possibilities frontier shows the quantity of two goods
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x thatcan be produced. It implies that scarcity requires that choices be made as to how to
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x useresources.
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AACSB: Reflective Thinking x x


Accessibility: Keyboard
x x


NavigationBlooms: Understand
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Difficulty: 02 Medium x x


Gradeable: automatic
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Learning Objective: 01-
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,01
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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,3. The underlying reason that there are unattainable points on a production possibilities
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frontier is that there
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a. is government. x


b. are always choices that must be made.x x x x x x


c. are scarce resources within a fixed level of technology.
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d. is unemployment of resources.
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Explanation: The points outside the production possibilities frontier are unattainable. This
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means that currently available resources and technology are insufficient to produce
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xamounts greater than those illustrated on the frontier. On a graph, everything beyond the
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xfrontier is unattainable.
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AACSB: Reflective Thinking x x


Accessibility: Keyboard
x x


NavigationBlooms: Remember
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Difficulty: 01 Easy x x


Gradeable: automatic
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Learning Objective: 01-
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01
Topic: Modeling Opportunity Cost Using the Production Possibilities Frontier
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4. The underlying reason production possibilities frontiers are likely to be bowed out
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(rather than linear) is because
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a. choices have consequences. x x


b. there are always opportunity costs. x x x x


c. some resources and people can be better used producing one good rather
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than another.
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d. there is always some level of unemployment. x x x x x x


Explanation: If the production possibilities frontier is not a line but is bowed out away
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xfrom the origin, then opportunity cost is increasing. The reason for this is that as we add
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xmore resources to the production of, for example, pizza, we are using fewer resources to
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xproduce soda. Compounding that problem, at each stage as we take the resources away
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xfrom soda and put them into pizza, we are moving workers who are worse at pizza
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xproduction and better at soda production than those moved in the previous stage. This
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xmeans that the increase in pizza production is diminishing and the loss in soda
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xproductionis increasing. An economist would call this an example of increasing
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xopportunity cost. If the production possibilities frontier is a straight line that is not bowed
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xout away from the origin, then opportunity cost is constant.
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AACSB: Knowledge Application x x


Accessibility: Keyboard
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NavigationBlooms: Remember
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Difficulty: 01 Easy x x


Gradeable: automatic
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Learning Objective: 01-
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02
Topic: Attributes of the Production Possibilities Frontier
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, 5. Suppose you were modeling the impact of the introduction of computer automation
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into manufacturing on a production possibilities frontier (PPF) with two manufactured
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xgoods on their respective axes. It would be more likely that the result would be
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a) generalized growth with the PPF moving both up and to the right. x x x x x x x x x x x


b) specialized growth with the PPF moving both up and to the right. x x x x x x x x x x x


c) generalized growth with the PPF just moving up and not to the right. x x x x x x x x x x x x


d) specialized growth with the PPF just moving up and not to the right. x x x x x x x x x x x x


xExplanation: Computer automation is a general improvement in technology so it
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xwouldimprove all manufacturing. As a result, it would result in generalized growth
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xand movethe PPF both up and to the right.
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AACSB: Knowledge Application
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Accessibility: Keyboard
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NavigationBlooms: Remember
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Difficulty: 01 Easy x x


Gradeable: automatic
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Learning Objective: 01-
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03Topic: Economic
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Growth
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6. The optimization assumption suggests that people make
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a. irrational decisions. x


b. unpredictable decisions. x


c. decisions to make themselves as well off as possible. x x x x x x x x


d. decisions without thinking very hard. x x x x


Explanation: The optimization assumption suggests that the person in question is trying
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to maximize some objective. Consumers are assumed to be making decisions that
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xmaximize their happiness subject to a scarce amount of money.
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AACSB: Reflective Thinking
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Accessibility: Keyboard
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NavigationBlooms: Remember
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Difficulty: 01 Easy x x


Gradeable: automatic
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Learning Objective: 01-
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01
Topic: Thinking Economically
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7. Imagine an economist ordering donuts one-by-one. When deciding how many donuts
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to order they would pick that number where the enjoyment of the
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xenjoyment they could get from using the money on another good.
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a. first donut x


b. last/marginal donut x


c. average/typical donut x


d. total number of donuts x x x


Explanation: The enjoyment of the last slice is the marginal benefit of that slice. If this
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enjoyment is more than the enjoyment from some alternative, more will be consumed.
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