Pearson Edexcel IGCSE · Economics

The economic problem: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on The economic problem.

10 questions26 marksFree, no account

Question 1

1 mark

A person chooses to spend their Saturday working overtime to earn extra money instead of attending a friend's wedding. In economic terms, the wedding represents the:

Question 2

1 mark

A country's Production Possibility Curve (PPC) shifts inwards towards the origin. Which of the following factors would most likely cause this change?

Question 3

1 mark

An economy produces two goods: Agriculture and Manufacturing. If the economy is currently operating on its Production Possibility Curve (PPC) and decides to increase the production of Manufacturing, what must happen according to the concept of opportunity cost?

Question 4

1 mark

A farmer has a fixed plot of land and chooses to grow wheat instead of barley or oats. Barley was the farmer's next preferred alternative.

What is the opportunity cost of this decision?

Question 5

1 mark

The table below shows the maximum combinations of consumer goods and capital goods an economy can produce in a year using all available resources efficiently.

Combination	Consumer Goods (units)	Capital Goods (units)
A	100	0
B	80	15
C	50	25
D	0	30

What is the opportunity cost of increasing the production of capital goods from \(15\) units to \(25\) units?

Question 6

3 marks

Define the term scarcity and explain its relationship to the necessity of making economic choices.

Write your answer out first, then check it against the worked solution.

Question 7

5 marks

Explain how a Production Possibility Curve (PPC) diagram can be used to illustrate both opportunity cost and unemployed resources within an economy.

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Question 8

2 marks

Identify the two conflicting factors that create the fundamental economic problem in any society.

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Question 9

3 marks

The economic problem arises due to the conflict between finite resources and infinite needs.
(a) Define the term scarcity.
(b) Using a real-world example, explain the concept of opportunity cost for a government choosing to spend money on a new motorway instead of a new school.

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Question 10

8 marks

An economy is capable of producing Capital Goods and Consumer Goods.
(a) Draw a Production Possibility Curve (PPC) diagram. Label a point X showing inefficient use of resources and a point Y showing an unobtainable level of production.
(b) Explain two possible causes that would lead to a positive economic growth shift (outward shift) of the entire PPC.
(c) Distinguish between the maximum productive potential of an economy and its actual output using your diagram.

Write your answer out first, then check it against the worked solution.

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