Scarcity, Choice and Opportunity Cost

Which combination best describes the basic economic problem?

• A

• B

• C

• D

What must follow when scarcity exists?

• Consumers have to make choices

• Governments are unable to supply public goods

• Producers must be misallocating resources

• Workers must be earning low wages

Why is choice central to the economic problem?

• Different governments have different objectives

• Firms have access to unlimited resources

• Most resources have alternative uses

• People's wants are limited

What confirms that scarcity exists?

• A product has an opportunity cost.

• The government has set a minimum price for a product.

• The supply of a product has fallen.

• The demand tor a product has risen.

Which question does not directly refer to the basic economic problem?

• What goods and services should a firm produce?

• What price should a firm charge?

• What production methods should a firm use?

• Who should receive the goods and services that a firm produces?

Which combination of events must increase the level of scarcity in an economy?

• discovery of new oil reserves and higher saving ratios

• improved application of technology and new invention

• less certain weather patterns and a fashion for greater consumption

• more efficient power generation and a reduced birth rate

What is the fundamental assumption of the economic problem?

• Factors of production are finite.

• Individuals are the best judges of their own wellbeing.

• Individuals can be relied upon to behave rationally.

• The principal aim of private firms is profit maximisation.

A worker earns $40 per hour. Rather than work, she decides to visit a museum for three hours.

The visit costs a total of $40.

What is the opportunity cost of visiting the museum?

• $40

• $80

• $120

• $160

A student buys a flute for $80 but then is unable to learn to play it. It has a resale value of $50, while the shop retail price of the same type of flute has risen to $95.

What is the present opportunity cost to the student of keeping the flute?

• $30

• $50

• $80

• $95

The diagram is from a chapter on 'The Economic Problem' in an Economics textbook. It should contain the terms opportunity cost, scarcity and choice in the order that identifies the economic problem.

What is the correct order for the terms to appear in the diagram?

• choice → opportunity cost → scarcity

• choice → scarcity → opportunity cost

• scarcity → choice → opportunity cost

• scarcity → opportunity cost → choice