Sample Quizzes For Preparation: Scarcity, Choice And Opportunity Cost
AS Level Economics – Topic 1.1: Scarcity, Choice and Opportunity Cost
Question 1
Which of the following best describes the fundamental economic problem?
A. Prices are always rising
B. Human wants are unlimited, but resources are limited
C. Government spending is excessive
D. Markets fail to allocate goods effectively
Question 2
Which of the following is an example of a capital resource?
A. A doctor
B. A forest
C. A factory machine
D. A plot of land
Question 3
What is meant by ‘opportunity cost’?
A. The total cost of all possible options
B. The benefit gained from the chosen alternative
C. The next best alternative foregone
D. The price paid for a good or service
Question 4
Why do governments have to make choices?
A. Because inflation is rising
B. Because resources are unlimited
C. Because resources are scarce
D. Because wants are limited
Question 5
Which of the following decisions reflects the question ‘How to produce’?
A. Producing more wheat than rice
B. Choosing between producing for rich or poor
C. Using labor-intensive methods rather than machinery
D. Deciding to export goods to foreign markets
Question 6
In economics, what is meant by the term ‘resource allocation’?
A. The distribution of goods among customers
B. The way prices are determined in the market
C. The decision on how to use scarce resources
D. The creation of new technologies for production
Question 7
Which factor of production does a risk-taking entrepreneur represent?
A. Land
B. Labour
C. Capital
D. Enterprise
Question 8
Which of the following is a normative statement?
A. Scarcity leads to opportunity cost
B. Governments should provide free healthcare
C. Opportunity cost increases with scarcity
D. All resources are finite
Question 9
Which of the following is NOT a question in resource allocation?
A. What to produce?
B. How to produce?
C. Why to produce?
D. For whom to produce?
Question 10
Which of the following choices involves the concept of opportunity cost?
A. Breathing air
B. Using inherited land
C. Spending time watching a movie instead of studying
D. Receiving a gift
Question 11
Which best describes a free good?
A. One that is underpriced
B. One that is not taxed
C. One with no opportunity cost
D. One that has no demand
Question 12
Why is the production possibility curve (PPC) used in economics?
A. To measure inflation
B. To show equilibrium
C. To illustrate scarcity and opportunity cost
D. To analyze monopolies
Question 13
A student decides to spend 2 hours studying economics instead of going to a concert. What is the opportunity cost?
A. The price of the concert ticket
B. The 2 hours of studying
C. The benefit they would have received from the concert
D. The exam grade in economics
Question 14
Which of these is NOT a scarce resource?
A. Gold
B. Time
C. Air in the atmosphere
D. Skilled labor
Question 15
Which of these is considered land in economics?
A. A mining machine
B. Oil reserves
C. A truck used for delivery
D. A chemical engineer
Question 16
What does scarcity lead directly to?
A. Economic growth
B. Government failure
C. Choice
D. Free market economy
Question 17
What is the main reason why firms must choose between alternative uses of their capital?
A. Government intervention
B. Unlimited profits
C. Scarcity of capital
D. Changing technology
Question 18
Why is opportunity cost always present in decision-making?
A. Because of limited government intervention
B. Because not all alternatives have value
C. Because choosing one option means giving up another
D. Because all goods are public goods
Question 19
Which of these is most likely to have a high opportunity cost?
A. Taking a walk in the park
B. Watching TV during work hours
C. Sleeping 8 hours a day
D. Drinking water
Question 20
Which of the following correctly identifies the four factors of production?
A. Price, cost, demand, supply
B. Labour, land, capital, enterprise
C. Government, banks, labor unions, firms
D. Inputs, outputs, revenue, profit
Question 21
In a command economy, who decides ‘what to produce’?
A. The government
B. Individual consumers
C. Private firms
D. Shareholders
Question 22
Which of the following is NOT a feature of the basic economic problem?
A. Scarcity
B. Unlimited wants
C. Efficient markets
D. Choice
Question 23
In microeconomics, what is usually the main focus when analyzing opportunity cost?
A. National policies
B. Government revenue
C. Individual decision-making
D. Export performance
Question 24
What would NOT be considered an economic good?
A. Bottled water
B. A doctor’s time
C. A road network
D. Sunlight
Question 25
Which of the following best explains why choices have to be made in economics?
A. Because markets always clear
B. Because some resources are more expensive than others
C. Because wants exceed the available resources
D. Because people are selfish
Question 26
Which of these is an example of a normative economic statement?
A. The inflation rate is 7%
B. The unemployment rate is falling
C. The government should increase taxes on the rich
D. A rise in interest rates reduces spending
Question 27
Which statement about opportunity cost is true?
A. It applies only to monetary decisions
B. It increases in a free market
C. It does not apply when there are infinite resources
D. It is irrelevant in resource allocation
Question 28
What is the opportunity cost of government spending more on defense?
A. Increased defense capability
B. Decreased public sector employment
C. Reduced spending on education or healthcare
D. More taxes collected
Question 29
Which of the following is a microeconomic implication of scarcity?
A. The level of national GDP
B. Interest rate policy
C. A consumer deciding between products
D. The size of the national debt
Question 30
Why is economic choice unavoidable?
A. Because economics is based on theory
B. Because all goods are scarce
C. Because of surplus production
D. Because people do not understand economics
Marking Key and Detailed Explanations – AS Level Economics: Topic 1.1
Question 1
Correct Answer: B
Explanation: The fundamental economic problem is scarcity—resources are limited but wants are unlimited.
Question 2
Correct Answer: C
Explanation: A factory machine is a man-made aid to production, which classifies it as capital.
Question 3
Correct Answer: C
Explanation: Opportunity cost is the next best alternative foregone when a decision is made.
Question 4
Correct Answer: C
Explanation: All economic agents, including governments, must choose how to use scarce resources.
Question 5
Correct Answer: C
Explanation: “How to produce?” refers to the method of production—labor-intensive vs capital-intensive.
Question 6
Correct Answer: C
Explanation: Resource allocation refers to how scarce resources are distributed for different uses.
Question 7
Correct Answer: D
Explanation: Enterprise refers to the human resource that organizes the other factors and takes risks.
Question 8
Correct Answer: B
Explanation: Normative statements include value judgments or opinions—“should” indicates a normative stance.
Question 9
Correct Answer: C
Explanation: “Why to produce?” is not one of the basic resource allocation questions.
Question 10
Correct Answer: C
Explanation: Opportunity cost arises when choosing one activity (watching a movie) over another (studying).
Question 11
Correct Answer: C
Explanation: A free good, like air, has no opportunity cost because it is not scarce.
Question 12
Correct Answer: C
Explanation: The PPC shows the trade-off between two goods and illustrates scarcity and opportunity cost.
Question 13
Correct Answer: C
Explanation: The benefit of the next best alternative (concert) is the opportunity cost.
Question 14
Correct Answer: C
Explanation: Air in the atmosphere is generally considered abundant and not scarce.
Question 15
Correct Answer: B
Explanation: Oil is a natural resource and considered part of “land” in economics.
Question 16
Correct Answer: C
Explanation: Scarcity leads to the necessity of choice because not all wants can be satisfied.
Question 17
Correct Answer: C
Explanation: Firms must allocate their scarce capital resources to the most efficient uses.
Question 18
Correct Answer: C
Explanation: Opportunity cost is always present because choosing one option always involves forgoing another.
Question 19
Correct Answer: B
Explanation: Watching TV during work hours has a high opportunity cost because of lost productivity or earnings.
Question 20
Correct Answer: B
Explanation: The four factors of production are: land, labor, capital, and enterprise.
Question 21
Correct Answer: A
Explanation: In a command economy, the government makes all resource allocation decisions.
Question 22
Correct Answer: C
Explanation: Efficient markets are desirable but not part of the basic economic problem.
Question 23
Correct Answer: C
Explanation: Microeconomics often focuses on how individuals and firms make choices under scarcity.
Question 24
Correct Answer: D
Explanation: Sunlight is abundant and not considered an economic good because it has no opportunity cost.
Question 25
Correct Answer: C
Explanation: Because wants exceed resources, all economic agents must make choices.
Question 26
Correct Answer: C
Explanation: This is a normative statement because it expresses a judgment about what the government should do.
Question 27
Correct Answer: C
Explanation: If resources were infinite, there would be no need for trade-offs or opportunity cost.
Question 28
Correct Answer: C
Explanation: Spending more on defense means spending less on other sectors—opportunity cost.
Question 29
Correct Answer: C
Explanation: A consumer choosing between products is a microeconomic application of scarcity.
Question 30
Correct Answer: B
Explanation: Because all goods are scarce, choices are necessary, making economic choice unavoidable.