1.1

Question 1

What is the definition of scarcity?

Answer 1

Limited resources, unlimited wants

Scarcity is a fundamental economic problem arising because resources are finite while human wants are infinite.

Question 2

What does opportunity cost refer to?

Answer 2

The next best alternative foregone

Opportunity cost is a key concept in economics that highlights the cost of choosing one option over another.

Question 3

What does PPF stand for?

Answer 3

Production Possibility Frontier

PPF is a curve showing all maximum possible output combinations of two goods that can be produced with available resources.

Question 4

What does a point on the PPF curve represent?

Answer 4

Efficiency

Points on the PPF indicate that resources are fully utilized in the production of goods.

Question 5

What does a point inside the PPF curve represent?

Answer 5

Inefficiency

Points inside the PPF indicate that resources are not being fully utilized.

Question 6

What does a point outside the PPF curve represent?

Answer 6

Unattainable

Points outside the PPF are not achievable with current resources unless economic growth occurs.

Question 7

What causes an outward shift in the PPF?

Answer 7

More resources or better technology

An outward shift indicates an increase in the economy’s capacity to produce goods.

Question 8

What can cause an inward shift in the PPF?

Answer 8

Natural disaster, war, etc.

An inward shift indicates a decrease in the economy’s production capacity.

Question 9

Define a positive statement.

Answer 9

Objective, testable statement

Positive statements are based on factual evidence and can be verified.

Question 10

Define a normative statement.

Answer 10

Subjective, value-based statement

Normative statements reflect opinions or beliefs about what ought to be.

Question 11

Who are considered economic agents?

Answer 11

Consumers, producers, and government

Economic agents make decisions regarding the allocation of scarce resources.

Question 12

Fill in the blank: The basic economic problem is how to allocate scarce resources among competing _______.

Answer 12

uses

This allocation problem arises because resources are limited while wants are infinite.

Question 13

What is the role of capital in the factors of production?

Answer 13

Man-made resources (e.g. machinery)

Capital is one of the four key factors of production, alongside land, labor, and enterprise.

Question 14

What does the term ‘enterprise’ refer to in economics?

Answer 14

Entrepreneurs who take risks

Enterprise involves the willingness to take on risks in order to create and manage businesses.

Question 15

What are the four factors of production?

Answer 15

• Capital
• Enterprise
• Land
• Labour

These factors are essential for the production of goods and services in an economy.