Economic Concepts Quiz

The basic economic problem of relative scarcity arises because:

• Resources are unlimited, but wants are limited.

• Wants are unlimited, but resources are limited.

• Both wants and resources are unlimited.

• Both wants and resources are limited.

Which of the following best describes why individuals, businesses, and governments need to make decisions?

• To eliminate scarcity completely.

• Because resources are abundant.

• Due to the problem of relative scarcity.

• To increase wants and needs.

On a Production Possibility Curve (PPC), a point inside the curve represents:

• Efficient use of resources.

• Underutilization of resources.

• Unattainable production levels with current resources.

• Economic growth.

The concept of opportunity cost is best illustrated by:

• Moving from one point to another on the PPC.

• Producing at any point inside the PPC.

• Shifting the PPC outward due to technological advancement.

• Producing beyond the PPC with current resources.

In the context of the PPC, a trade-off is:

• The sacrifice of one good to produce more of another.

• Producing more of both goods simultaneously.

• Operating at a point outside the PPC.

• Eliminating opportunity costs.

Which factor of production is correctly matched with its corresponding income?

• Land - Wages

• Labour - Rent

• Capital - Interest

• Entrepreneurial ability - Wages

An example of capital as a factor of production is:

• A factory worker.

• Machinery used in production.

• Natural resources like oil.

• A business owner's management skills.

The difference between efficiency and equity is that efficiency refers to:

• How resources are owned.

• The fairness of resource distribution.

• The optimal use of resources.

• Who benefits from production.

In the five-sector circular flow model, households primarily provide which of the following to businesses?

• Goods and services

• Government expenditure

• Factors of production

• Savings

Which of the following is considered a withdrawal (leakage) in the circular flow of income model?

• Investment

• Government spending

• Exports

• Savings