What is the basic economic problem?
The basic economic problem is the scarcity of resources relative to human wants.
True or False: Scarcity means that resources are unlimited.
False
Fill in the blank: The basic economic problem arises because of the conflict between ______ and ______.
unlimited wants; limited resources
What are the three main questions every economy must answer?
What to produce, how to produce, and for whom to produce.
Multiple Choice: Which of the following is NOT a factor of production? A) Land B) Labor C) Money D) Capital
C) Money
What is meant by ‘opportunity cost’?
The value of the next best alternative forgone when making a choice.
True or False: All resources are equally scarce.
False
What is the definition of ‘scarcity’?
Scarcity refers to the limited availability of resources to meet unlimited wants.
Fill in the blank: The allocation of scarce resources involves ______ and ______.
decision-making; trade-offs
What does the term ‘resource allocation’ refer to?
The process of distributing available resources among various uses.
Multiple Choice: Which factor of production includes natural resources? A) Labor B) Land C) Capital D) Enterprise
B) Land
What is ‘production possibility frontier’ (PPF)?
A graph that shows the maximum possible output combinations of two goods that can be produced with available resources.
True or False: A point inside the PPF indicates efficient use of resources.
False
What does it mean if an economy is operating on the PPF?
It means that the economy is using all its resources efficiently.
Fill in the blank: The ______ illustrates the trade-offs between two goods.
production possibility frontier
What are the four factors of production?
Land, labor, capital, and entrepreneurship.
Multiple Choice: Which of the following best describes labor? A) Tools and machinery B) Human effort C) Natural resources D) Financial assets
B) Human effort
What is the significance of opportunity cost in decision-making?
It helps individuals and businesses understand the trade-offs involved in choosing one option over another.
True or False: Opportunity cost is always measured in monetary terms.
False
Fill in the blank: An economy that operates efficiently is said to be ______ on its PPF.
on
What does a shift outward of the PPF indicate?
An increase in the economy’s resources or improvements in technology.
Multiple Choice: Which of the following can lead to economic growth? A) Increased unemployment B) Improved technology C) Decreased resource availability D) Increased inflation
B) Improved technology
What is ‘economic efficiency’?
When resources are allocated in a way that maximizes the total benefit received from those resources.
True or False: Economic efficiency means that all resources are used up.
False
