The basic economic problem
What is the basic economic problem?
A finite resources and limited wants
B finite resources and unlimited wants
C infinite resources and limited wants
D infinite resources and unlimited wants
B finite resources and unlimited wants
What is a factor of production?
A a semi-skilled, young worker
B direct taxes received by a government
C shares in a manufacturing company
D stocks of money held a bank
A a semi-skilled, young worker
Define economic goods.
Economic goods have opportunity cost because they are scarce.
Define market disequilibrium.
It's the situation when quantity supplied is not equal to the quantity demanded, and market price has a tendency to change.
How is price determined in a free market?
By the interaction of demand and supply.
Why is choice an important part of the basic economic problem?
A Choice is necessary to achieve an equilibrium price.
B Limited resources have many uses.
C Manufacturers produce a large variety of foods.
D The market leads to an unequal distribution of goods.
B Limited resources have many uses.
An increase in the number of manufacturing robots in the car manufacturing industry represents an increase in the quantity of which factor of production?
A capital
B enterprise
C labour
D land
A capital
What could be the opportunity cost of a nuclear power station?
A the running costs of the power station
B a coal-fired power station
C the current value of the power station
D the cost of building the power station
B a coal-fired power station
Whtat's the difference between shortage and surplus?
Shortage happens when quantity demanded is greater than quantity supplied and market price will then increase.
Surplus happens when quantity demanded is less than quantity supplied and market price will then decrease.
Explain two reasons that cause an increase in the price of a product such as computer.
An increase in the price of a product can either be caused by an increase in demand or decrease in supply.
For example, if people's incomes increase, the demand for computer will increase because it's a normal good, so the price will increase.
Also, if the cost of producing computer increases, the supply for computer will decrease and its price will increase.
Explain the link between the basic economic problem and opportunity cost.
Since resources have many uses but they are limited, people need to make choices in order to satisfy their unlimited wants and needs. People need to give up the next best alternative, which causes an opportunity cost.
In a region of high unemployment, a manufacturer applied for a loan from the government so that the number of machines in an existing factory could be increased. it was hoped this would also enable more workers to be employed.
Which factors of production does this decision involve?
A labour and capital only
B labour, capital and enterprise only
C land, labour and capital only
D land, labour, capital and enterprise
B labour, capital and enterprise only
A person works at home making table cloths. He works for 6 hours each day and makes 15 table cloths an hour. He sells them for $10 each.
He then decides to work for only 4 hours each day.
What can be concluded from the above information?
A The lost profit would be $300.
B The lost revenue would be $60.
C The daily opportunity cost would be 30 table cloths.
D The daily opportunity cost would be $50.
C The daily opportunity cost would be 30 table cloths.
What is meant by an equilibrium price?
A a government price that ensures fairness for all
B a price that has no pressure to rise or fall
C a price that maximises the profits of the producers
D a price that maximises the satisfaction of the consumers
B a price that has no pressure to rise or fall
In August 2013, a lengthy strike in north-east India, where the finest and most expensive Darjeeling tea is grown, shut down the tea industry at harvest time.
What is the likely outcome of such a situation on a demand and supply diagram for Darjeeling tea?
A The price will rise because demand will switch to other teas.
B The price will rise because the strike will cause a movement down the supply curve.
C The price will rise because the supply curve will move to the left.
D The price will rise because there will be a fall in demand for the remaining Darjeeling tea.
C The price will rise because the supply curve will move to the left.
Explain the examples of the basic economic problem faced by consumers and the government.
• Consumers have limited income and they need to decide how to spend their finite income.
• The government has finite resources and its spending power is limited by the amount of tax that they can collect. The government needs to decide how they collect tax and then they need to decide whom they spend money on.
What is most likely to reduce the supply of factors of production in an economy?
A increasing the age of retirement
B introducing new methods of irrigation
C lowering the cost of borrowing from banks
D raising the rate of tax on profits
D raising the rate of tax on profits
Explain different opportunity cost faced by consumers, producers and the government.
In 2011, a company selling milk in glass bottles replaced them with new plastic bottles. When they were introduced, the equilibrium quantity on the market fell.
What could be a reason for this fall?
A Consumers preferred the new bottle because it was lighter to carry.
B Milk from the farms used to fill the bottle cost more.
C The bottle was cheaper than the existing glass bottle to produce.
D The new bottle was introduced with a successful advertising campaign.
B Milk from the farms used to fill the bottle cost more.
In 2011 the US Government declared that the country must increase the manufacture of fuel from crops such as corn that have previously only been used for food.
What is likely to happen in the market for corn?
A a movement along the demand curve for corn
B a movement along the supply curve for corn
C a shift to the left in the demand curve for corn
D a shift to the left in the supply curve for corn
B a movement along the supply curve for corn