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1 Scarcity, choice and opportunity cost
EXAM-STYLE QUESTIONS: ...
May 27, 2024
question2
Solution
a
Wants are unlimited because there will always be something we would like to have. This is due to human nature and the continuous desire for more goods and services
Answer
A
Key Concept
Unlimited Wants
Explanation
Human wants are unlimited because there is always something new or additional that people desire, driven by the continuous pursuit of betterment and satisfaction.
question3
Solution
a
Scarcity and Choice: The government has limited resources, which means it cannot fulfill all the wants of its population. This necessitates making choices about how to allocate these resources
Answer
A
Key Concept
Scarcity and Choice
Explanation
The government must make choices because it has limited resources and cannot satisfy all the wants of its population. This is a fundamental concept in economics, where scarcity forces decision-making.
question 4
Solution
a
Opportunity Cost Definition: Opportunity cost is the value of the next best alternative foregone when a choice is made
b
Teacher's Earnings: If the teacher marks examination papers, she earns $900
c
Cost of Maintenance: Hiring someone to do the maintenance work costs $600
d
Opportunity Cost Calculation: The opportunity cost of the teacher doing the maintenance work herself is the income she foregoes from not marking papers, which is $900
Answer
$900
Key Concept
Opportunity Cost
Explanation
The opportunity cost is the value of the next best alternative foregone. In this case, the teacher foregoes earning $900 by choosing to do the maintenance work herself instead of marking examination papers.
question 5
Solution
a
Definition of Opportunity Cost: Opportunity cost is the value of the next best alternative that is foregone when a choice is made
b
Identifying Alternatives: In this scenario, the student has two choices: (1) stay home to prepare for the assessment, or (2) play football with a friend
c
Evaluating the Next Best Alternative: The next best alternative to staying home and preparing for the assessment is playing football, which provides healthy exercise
Answer
The healthy exercise you will get by playing football.
Key Concept
Opportunity Cost
Explanation
The opportunity cost of staying home to prepare for the assessment is the value of the next best alternative, which in this case is the healthy exercise you would have gotten by playing football.
question 6
Solution
a
Understanding the Question: The question asks which of the given options is not a fundamental question that an economy has to address
b
Fundamental Economic Questions: The fundamental economic questions are typically "What to produce?", "How to produce?", and "For whom to produce?"
c
Analysis of Options:
- Option A: "how resources are used" relates to "How to produce?".
- Option B: "for what resources are used" relates to "What to produce?".
- Option C: "where resources are used" is not a fundamental economic question.
- Option D: "for whom resources are used" relates to "For whom to produce?"
Answer
C where resources are used
Key Concept
Fundamental Economic Questions
Explanation
The fundamental economic questions that every economy must address are "What to produce?", "How to produce?", and "For whom to produce?". The option "where resources are used" does not fit into these categories.
question1
Solution
a
The fundamental economic problem exists because resources are scarce in relation to unlimited wants
Answer
A
Key Concept
Scarcity
Explanation
The fundamental economic problem arises because resources are limited while human wants are unlimited. This necessitates making choices about how to allocate resources efficiently
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