What is economics?: Practice Questions

In the study of economics, which of the following is the best example of the factor of production known as capital?

Consider a country producing capital goods and consumer goods, as shown in the diagram below. A point located inside the Production Possibilities Curve (PPC) indicates which of the following economic situations?

Consider an economy initially producing at a point on its Production Possibilities Curve (PPC), representing the trade-off between good \(X\) and good \(Y\). If a technological innovation occurs that exclusively increases the productivity of resources used in the production of good \(X\), while the technology for good \(Y\) remains unchanged, what is the most likely effect on the opportunity cost of producing good \(Y\)?

Which of the following describes an issue studied within microeconomics rather than macroeconomics?

An individual has \( \$50 \) to spend and is choosing between purchasing a concert ticket or a textbook. They choose the concert ticket. What is the opportunity cost of this decision?

Explain why the opportunity cost of prioritizing sustainability in resource allocation may differ between a developing and a developed economy, despite the universal nature of scarcity.

(a) Explain the fundamental economic problem of scarcity and how it forces a society to answer the three basic economic questions: what to produce, how to produce, and for whom to produce. (3 marks)

(b) Using the concept of opportunity cost, analyze the implications of a government's decision to reallocate resources from military spending toward environmental protection. (2 marks)

(c) Evaluate the extent to which the goal of economic well-being can be achieved if a government prioritizes equity over efficiency. In your response, consider the interdependence between these key concepts. (3 marks)