Cambridge AS Economics Final Exam

What is the fundamental economic problem?

• Scarcity of resources

• Abundance of resources

• Equal distribution of wealth

• Unlimited wants

What is the difference between wants and needs?

• Wants are essential, needs are not

• Needs are essential, wants are not

• Wants and needs are the same

• Needs are unlimited, wants are limited

What is the significance of opportunity cost?

• It measures the cost of a good in terms of another good

• It determines the price of a product

• It is irrelevant in decision making

• It is the same as accounting cost

What are the four factors of production?

• Land, labor, capital, entrepreneurship

• Money, time, effort, resources

• Goods, services, labor, capital

• Land, labor, goods, services

What is meant by the division of labor?

• Specialization of tasks

• Equal distribution of work

• Random assignment of tasks

• Centralized decision making

What are the characteristics of a market economy?

• Government control, planned production

• Free market, supply and demand

• Central planning, fixed prices

• Mixed ownership, regulated prices

How are resources allocated in a planned economy?

• By government planning

• By market forces

• By individual choice

• By random distribution

What is a production possibility curve (PPC)?

• A graph showing maximum possible output combinations

• A chart of economic growth rates

• A table of resource allocations

• A list of production costs

How can a PPC be used in an economy?

• To show resource allocation efficiency

• To determine tax rates

• To set interest rates

• To calculate GDP

What is the function of money?

• Medium of exchange

• Source of wealth

• Measure of happiness

• Tool for investment