Sample Quizzes For Preparation: The Nature of The Economic Problem

O Level and IGCSE Economics – Chapter 1.1 Quiz: The Nature of the Economic Problem

Question 1: What is the basic economic problem faced by all societies?

A. Inflation
B. Scarcity of wants
C. Limited wants and unlimited resources
D. Unlimited wants and limited resources

Question 2: Why do consumers face the economic problem?

A. Because they have too many products to choose from
B. Because they have limited income and unlimited wants
C. Because they are unemployed
D. Because they only buy economic goods

Question 3: Which of the following is a scarce resource?

A. Air
B. Sunlight
C. Gold
D. Rain

Question 4: What is an opportunity cost?

A. The profit earned from a decision
B. The money saved from making a choice
C. The next best alternative foregone
D. The total cost of production

Question 5: A government decides to build a new airport instead of new hospitals. What is the opportunity cost?

A. Cost of building the airport
B. Land used for the airport
C. Number of travelers at the airport
D. New hospitals that will not be built

Question 6: Which of the following is an example of a free good?

A. Drinking water
B. Electricity
C. Sunlight
D. A loaf of bread

Question 7: What distinguishes economic goods from free goods?

A. Economic goods are free for everyone
B. Free goods are always sold in markets
C. Economic goods have opportunity cost; free goods do not
D. Free goods are always man-made

Question 8: Why must workers make choices in an economy?

A. They have unlimited time
B. They can do multiple jobs at once
C. Jobs are paid equally
D. They have limited time and skills

Question 9: Why do producers face the economic problem?

A. They don’t want to make a profit
B. They have to choose how to allocate scarce resources
C. They can only produce free goods
D. They do not employ workers

Question 10: What is the main reason governments face economic choices?

A. Because they need to raise taxes
B. Because they want to stop inflation
C. Because they have limited resources and many priorities
D. Because they are elected democratically

Question 11: Which of these is NOT an example of a scarce resource?

A. Land
B. Labour
C. Capital
D. Sunshine

Question 12: Which of the following would be considered a free good in most cases?

A. Bottled water
B. Air in the countryside
C. Tap water in a city
D. Petrol

Question 13: Which concept explains why choices have to be made?

A. Barter
B. Inflation
C. Scarcity
D. Exchange

Question 14: Which of these has an opportunity cost?

A. Choosing not to spend any money
B. Choosing between two equally desirable items
C. Using a free voucher
D. Breathing clean air

Question 15: How can opportunity cost be best illustrated?

A. A consumer buying both a car and a house
B. A worker retiring at 60
C. A student choosing to study Economics instead of Biology
D. A company increasing all its workers’ wages

Question 16: What happens if resources were unlimited?

A. Inflation would increase
B. No need for any choices or opportunity costs
C. Prices would keep rising
D. There would be unemployment

Question 17: Who experiences the economic problem?

A. Only poor people
B. Only rich people
C. Everyone – consumers, producers, workers, governments
D. Only producers and governments

Question 18: What are ‘wants’ in economics?

A. Basic needs for survival
B. Unlimited desires for goods and services
C. Only luxury products
D. Resources that can be reused

Question 19: What does ‘scarce’ mean in economics?

A. Rare and expensive
B. Can be reused many times
C. Available in unlimited quantities
D. Limited in supply relative to demand

Question 20: Which of these is not a function of government in the context of the economic problem?

A. Allocating public resources
B. Producing all economic goods
C. Making decisions with limited funds
D. Choosing between different public services

Answer Key with Explanations – Chapter 1.1 Quiz: The Nature of the Economic Problem

Q1: D. Unlimited wants and limited resources

• Correct because this is the basic definition of the economic problem.
• Other options either reverse the logic or are unrelated.

Q2: B. Because they have limited income and unlimited wants

• Consumers face scarcity of income, which limits what they can afford despite endless desires.

Q3: C. Gold

• Gold is limited in quantity and must be mined, making it a scarce resource.
• Air and sunlight are typically free and abundant.

Q4: C. The next best alternative foregone

• Opportunity cost is about what you give up when making a choice.

Q5: D. New hospitals that will not be built

• This is the next best alternative foregone by choosing the airport.

Q6: C. Sunlight

• Free, abundant, and not produced using resources—classic free good.
• Other items require resources or payment.

Q7: C. Economic goods have opportunity cost; free goods do not

• This distinction is central to classifying goods as economic or free.

Q8: D. They have limited time and skills

• Workers can’t do everything at once and must make choices.

Q9: B. They have to choose how to allocate scarce resources

• Producers must decide what, how, and for whom to produce using limited inputs.

Q10: C. Because they have limited resources and many priorities

• Governments must decide how to distribute finite budgets.

Q11: D. Sunshine

• Sunshine is usually freely available and not scarce.

Q12: B. Air in the countryside

• Generally free and clean, not requiring resource use or production.

Q13: C. Scarcity

• It is scarcity that drives the need for economic decision-making.

Q14: B. Choosing between two equally desirable items

• Opportunity cost exists even when choices are equally valuable.
• Free items or inaction may not involve opportunity cost.

Q15: C. A student choosing to study Economics instead of Biology

• Biology is the opportunity cost of choosing Economics.

Q16: B. No need for any choices or opportunity costs

• If resources were unlimited, choice wouldn’t be necessary.

Q17: C. Everyone – consumers, producers, workers, governments

• All economic agents deal with resource limitations.

Q18: B. Unlimited desires for goods and services

• Wants go beyond basic needs and are never-ending.

Q19: D. Limited in supply relative to demand

• Scarcity isn’t about price but the gap between wants and available resources.

Q20: B. Producing all economic goods

• Governments don’t produce all goods; many are produced by the private sector.