Questions 1. What are the basic problems of any economy? 2. . “Economics” is concerned with scarcity and the need for choice.” Discuss this statement 3. Discuss the concept of opportunity cost. Explain its importance in economics. 4. How does the production possibility curve help to illustrate the concepts of scarcity, choice and opportunity cost? 5. What is the production possibility frontier? 6. Draw a production possibility frontier and in the diagram, insert an attainable combination and an unattainable combination. 7. Show a combination that indicates that resources are idle in the economy 8. State 3 assumptions made when drawing a production possibility boundary. 9. Define opportunity cost and give an example 10. Show how the production possibility curve illustrates the concepts of scarcity, choice and opportunity cost. 11. Using the following production possibility table, plot the production possibility curve for the goods oranges and chocolates. POINT A B C D E F ORANGES 100 95 85 70 50 0 CHOCOLATES 0 20 40 60 80 100 12. What fundamental economic principles are illustrated by a production possibility frontier? Explain the usual shape of a production possibility frontier. 13. How does a production possibility curve illustrate “economic inefficiency”? 14. What can cause a movement of a production possibility frontier? 15. What may enable an economy to consume a combination of goods outside its production possibility boundary? MCQ 1. What is the fundamental economic problem faced by any society? a. Limited resources and limited wants b. Unlimited resources and limited wants c. The alternative forgone d. Limited resources and unlimited wants 2. Economics is concerned with all of the following EXCEPT: a. The allocation of scarce resources to produce goods and services b. Explaining what factors influence consumer behaviour c. The construction of buildings in the economy d. The factors that determine the goods that firms produce 3. A man spends $10 to take a chance in a raffle. He wins the first prize of a trip to Tobago, or he can instead choose a cash of sum $500. He chooses the trip. What is the opportunity cost of choosing the trip? a. $10 b. $490 c. The lunch he had to forgo when he bought the ticket d. $500 4. A factor that may cause the production possibility frontier to move outwards is: a. Efficient use of resources b. Depletion of natural resources c. Fall in population through migration d. Technological progress 5. What is opportunity cost? a. The alternative forgone b. The choice made c. Unlimited wants d. Limited resources 6. The production possibility frontier shows: a. The maximum amount of resources that an economy possesses b. The maximum amount of two goods that an economy can produce with fixed resources c. The unlimited resources of an economy d. All the goods an economy can produce while leaving some resources idle. 7. A mixed economy is one in which: a. There is a well-developed industrial seector b. People of all races work in the economy c. All economic activity is controlled by the government d. Part of the economy is owned and controlled by the government. 8. Which is NOT a benefit of a centrally planned economy? a. Factors of production can be organised to produce public goods b. Factors of production can be organised to produce merit goods c. Goods and services are priced so that everyone can afford them. d. Some individuals can become richer because of earnings from land or capital they own. 9. Which of the following is not one of the basic questions of resource allocation? a. What to produce? b. How to produce? c. How much to produce? d. For whom to produce? 10. Which of the following is a normative economic statement? a. The state decides what is produced in a command economy b. A higher proportion of consumer goods is produced in a market economy than in a command economy c. Command economies have a higher rate if economic growth than market economies. d. A market economy is a more desirable form of economic system than a command economy. 11. Which of the following is an example of a free good? a. Sea water b. State education c. An expenses-paid business trip d. A toy included in a cereal packet to encourage people to buy the cereal. 12. Which of the following would shift the production possibility frontier of an economy to the right? a. A more even distribution of wealth b. An increase in the stock capital c. An increase in the number of people dependent on the working population d. An improvement in the efficiency with which factors of production are combined 13. A worker is currently earning $400 for a 40 hour week. Management offers a 12% wage increase or a basic wage of $410 and a reduction in the working week to 38 hours. What is the opportunity cost if the worker opts for a 38 hour week? a. 2 hours b. 38 hours c. $38 d. $48 14. S Good Y R ……………………… 0 T V Good X What is the opportunity cost of producing 0T amount of Good X? a. 0R amount of Good Y b. RS amount of Good Y c. TV amount of Good X d. 0V amount of Good X
