Economic Problem: Scarcity, Choice and Opportunity Cost

Which economic question is the least likely to arise as a result of scarcity?

• For whom shall we produce?

• How shall we produce?

• What shall we produce?

• When shall we produce?

A government is faced with the choice of spending on either education or healthcare.

Of what is this an example?

• Conservation of resources

• Monetary policy

• Opportunity cost

• Substitution of factors

What is meant by the economic problem?

• How to achieve achieve price stability?

• How to keep employment level high?

• The extent to which income should be redistributed?

• What will be produced, how and for whom?

Commercial companies are cutting down tropical rainforests for hard-wood timber.

What is the opportunity cost to society of this activity?

• Tax revenue from the sale of timber

• The environment that is destroyed

• The products made from the timber

• The profits of the companies

Which economic change would increase the problem of scarcity?

• A decrease in fish stocks

• A discovery of new oil fields

• An increase in labour productivity

• A reduction in waste

A student leaves school and decides to spend the next two years at a college to improve her qualifications.

What is the opportunity cost to the student of taking this decision?

• The cost of the course fees at the college

• The increase in job opportunities she will have as a result of her extra qualifications

• The lost production due to her not being in work

• The money she would have earned if she had been in work for the two years

A country with a low income per head discovers large quantities of oil, which eventually makes everybody better off.

Why is the basic economic problem of scarcity NOT solved by this discovery?

• People may not get jobs in the oil industry

• People's want are always changing and increasing

• Prices of oil can fluctuate on the world market

• Production of oil can damage the environment.

In China, the government is concerned about the level of poverty and the need for more resources in the poorer regions of the country. As a result, it is increasing its expenditure there and reducing it in the wealthier regions.

Which economic concept does this government policy illustrate best?

• Diseconomies of scale

• Market forces

• Opportunity cost

• Specialisation

A person works at home making table cloths. He works for 6 hours each day and make 15 table cloths an hour. He sells them at $10 each.

He then decides to work for only 4 hours each day.

What can be concluded from the above information?

• The lost profit would be $300

• The lost revenue would be $60

• The daily opportunity cost would be 30 table cloths

• The daily opportunity cost would be $50

A person makes sandwiches at home for five hours each day. She makes 20 sandwiches per hour, and she sells each sandwich for $2 each.

What is the opportunity cost if she takes a holiday on a working day?

• $2

• $40

• 20 sandwiches

• 100 sandwiches