What is the basic economic problem?
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B. The basic economic problem is finite resources and infinite wants; A reverses the two ideas, while C and D are not the definition.
Which statement best describes finite resources?
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C. Finite resources are limited in supply relative to wants; A reverses the relationship, B says resources cannot be used up, and D wrongly limits scarcity to developing countries.
What does infinite wants mean in economics?
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A. Infinite wants means wants are unlimited and continually expanding; B is too narrow, C is incorrect because wants change, and D contradicts scarcity.
Which of the following is the best example of a free good?
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D. Air that is freely available to breathe is a free good because it is not scarce; A, B and C are economic goods because they use scarce resources and have an opportunity cost.
What is a key characteristic of an economic good?
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C. Economic goods are scarce and require resources to produce; A and B describe free goods, and D is not a defining feature of economic goods.
Which statement about free goods is correct?
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A. Free goods are abundant and not scarce, so they have no opportunity cost; B, C and D confuse free goods with subsidised, worthless or volunteer-produced goods.
A fictional island has limited farmland. It must decide whether to grow more food or build new houses. This is an example of which resource allocation decision?
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D. Choosing between food and houses is a what to produce decision; how to produce concerns methods, for whom to produce concerns distribution, and when to produce is not one of the three basic allocation questions.
A clothing firm can use labour-intensive sewing machines or automated robots. This decision is mainly about:
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B. Choosing between labour-intensive sewing machines and automated robots is a how to produce decision; what to produce concerns the good, for whom to produce concerns distribution, and why to produce is not a basic allocation question.
A government decides to give extra healthcare funding to low-income families. This is mainly a decision about:
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C. Deciding who receives extra healthcare funding is a for whom to produce question; what and how concern the type and method of production, and tax is a separate policy tool.
A student has £30 and must choose between a concert ticket and a new book. The opportunity cost of buying the concert ticket is:
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A. Opportunity cost is the next best alternative forgone, which is the new book; B is the money cost, C is the benefit gained, and D is not the forgone alternative.
Why does scarcity force individuals and societies to make choices?
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D. Scarcity forces choices because resources are finite but wants are unlimited; A, B and C are incorrect descriptions of the economic problem.
A fictional factory can produce either 200 chairs or 100 tables in a day. If it chooses to produce 200 chairs, what is the opportunity cost in terms of tables?
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B. The opportunity cost is the alternative output given up, which is 100 tables; A, C and D do not match the stated trade-off.
Which of the following is an economic good rather than a free good?
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C. A hand-made wooden chair is an economic good because it is scarce and uses labour and timber; A, B and D are generally free goods when abundant and not scarce.
A fictional city council has a fixed budget. It can spend the money on either a new park or a new library, but not both. What does this situation illustrate?
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A. With a fixed budget, choosing the park means giving up the library, so resource allocation involves opportunity cost; B, C and D contradict the basic economic problem.
In a fictional country, people's wants for cars, phones and holidays keep growing, but the country has limited workers, land and machinery. What is the most likely result?
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B. Finite resources and infinite wants force the country to decide how to allocate scarce resources; A and C ignore scarcity, and D confuses economic goods with free goods.