1.

Scarcity refers to the situation where resources are limited in relation to the unlimited
wants and needs in society.
2. Scarcity necessitates making choices among competing wants and needs due to limited
resources.
3. A "need" is a basic requirement for survival (e.g., food), while a "want" is a desire that
enhances well-being (e.g., a vacation).
4. The economic problem arises due to the scarcity of resources relative to unlimited
wants, necessitating choices to allocate resources efficiently.
5. Opportunity cost is the value of the next best alternative foregone when a choice is
made. Example: Choosing to spend money on a vacation rather than saving for a car.
6. Opportunity cost prompts individuals to weigh the benefits of one choice against its
forgone alternatives, leading to more informed decisions.
7. Trade-offs occur when choosing one option over another involves sacrificing potential
benefits from the forgone option.
8. Trade-off: Studying for an exam (potential high grade) vs. working part-time (earning
money but less study time).
9. A production possibilities curve illustrates the maximum output of two goods a country
can produce using its available resources.
10. The PPC demonstrates the trade-offs and choices a country must make due to resource
scarcity.
11. A hypothetical PPC with computers and cars, points outside the curve indicate
unattainable production levels due to resource limitations.
12. Underutilization occurs when resources are not fully employed, leading to production
levels below the PPC.
13. Factors such as technological advancement or an increase in available resources can
shift the PPC outward.
14. Allocative efficiency is achieved when resources are allocated to produce the goods and
services that best satisfy society's wants.
15. Technological advancement increases production capabilities and shifts the PPC
outward, allowing more goods to be produced.
16. Positive economics focuses on factual analysis (e.g., rising unemployment rates), while
normative economics involves value judgments (e.g., unemployment is bad for society).
17. The price mechanism uses changes in prices to allocate resources efficiently, with higher
prices indicating scarcity and encouraging production.
18. Government intervention can influence prices through policies like subsidies, taxes, and
price controls, affecting resource allocation.
19. Opportunity cost ratio is the ratio of the opportunity cost of a decision to the benefit
gained from that decision. It can help compare different choices.
20. Using opportunity cost, weigh the benefits of excelling in the sports event against the
benefits of performing well in the exam, and make the decision that aligns with your
priorities and goals.

Multiple-Choice Questions:

1. What does the concept of scarcity in economics imply? a) Resources are unlimited b)
Wants are unlimited c) Both resources and wants are unlimited d) None of the above
2. Scarcity leads to the necessity of making: a) Unlimited choices b) Limited choices c) No
choices d) None of the above
3. Which of the following is an example of a "need"? a) Designer clothing b) Fast food c)
Clean drinking water d) Video games
4. The economic problem arises due to: a) Unlimited resources and unlimited wants b)
Limited resources and unlimited wants c) Unlimited resources and limited wants d)
Limited resources and limited wants
5. Opportunity cost is: a) The price of a good or service b) The value of the next best
alternative foregone c) The total cost of production d) The monetary cost of a decision
6. The concept of opportunity cost is most closely related to: a) Free goods b) Unlimited
resources c) Scarcity d) Wants
7. Trade-offs in decision-making refer to: a) The unlimited benefits of a choice b)
Sacrificing the next best alternative for a choice c) Making choices without any costs d)
None of the above
8. Allocative efficiency means: a) Producing goods with the lowest possible costs b)
Producing goods that society values the most c) Producing goods using the most
advanced technology d) Producing goods in the greatest quantity
9. A country's production possibilities curve (PPC) shows: a) The maximum price of goods
b) The minimum wage in the country c) The relationship between resources and
opportunity costs d) The total population of the country
10. Underutilization of resources occurs when: a) Resources are fully employed b) Resources
are overutilized c) Resources are not fully employed d) Resources are allocated
efficiently
11. Which of the following can cause a production possibilities curve to shift outward? a) A
decrease in technology b) A decrease in available resources c) An increase in
unemployment d) Technological advancement
12. The role of the price mechanism in a market economy is to: a) Set government
regulations b) Allocate resources based on consumer preferences and prices c)
Determine the quantity of goods produced d) Eliminate scarcity
13. Positive economics focuses on: a) Making value judgments b) Analyzing factual data c)
Evaluating economic policies d) None of the above
14. Government intervention in a market economy can influence: a) Resource scarcity b)
Consumer preferences c) Prices and resource allocation d) Technological advancement
15. Opportunity cost ratio is calculated as: a) Opportunity cost / Total cost b) Opportunity
cost / Benefit gained c) Total benefit / Opportunity cost d) Benefit gained / Opportunity
cost
16. Which concept best represents the trade-off between studying for an exam and working
part-time? a) Opportunity cost b) Allocative efficiency c) Underutilization d) Positive
economics
17. The concept of choice is closely related to: a) Unlimited resources b) Scarcity c) Negative
economics d) Underutilization
18. The unattainable points outside the production possibilities curve (PPC) represent: a)
Efficient resource allocation b) Full employment of resources c) Achievable production
levels d) Resource scarcity
19. What is the key idea behind the production possibilities curve (PPC)? a) It demonstrates
consumer preferences b) It shows the relationship between price and quantity
demanded c) It illustrates the trade-offs between two goods d) It represents the
government's resource allocation decisions
20. Opportunity cost is a fundamental concept that highlights the reality that: a) Unlimited
wants can be satisfied b) Resources are unlimited c) Every choice has associated costs d)
Scarcity is not a concern

Answers:

1. b) Wants are unlimited

2. b) Limited choices
3. c) Clean drinking water
4. b) Limited resources and unlimited wants
5. b) The value of the next best alternative foregone
6. c) Scarcity
7. b) Sacrificing the next best alternative for a choice
8. b) Producing goods that society values the most
9. c) The relationship between resources and opportunity costs
10. c) Resources are not fully employed
11. d) Technological advancement
12. b) Allocate resources based on consumer preferences and prices
13. b) Analyzing factual data
14. c) Prices and resource allocation
15. b) Opportunity cost / Benefit gained
16. a) Opportunity cost
17. b) Scarcity
18. d) Resource scarcity
19. c) It illustrates the trade-offs between two goods
20. c) Every choice has associated costs