O Level Economics: The basic economic problem, questions with answers

Which government action is likely to reduce the problem of scarcity?

1. banning the import of raw materials
2. borrowing money to purchase more defence equipment
3. introducing maximum prices for essential goods
4. subsidising firms to discover more natural resources

A government wants to build a new hospital. What is most likely to prevent the government from doing this?

1. People in the country cannot afford healthcare.
2. People in the country would go abroad for healthcare.
3. The government cannot agree how big the hospital should be.
4. The government does not have enough money.

What could not occur in a market economic system?

1. a monopolist supplying specialist goods to the market
2. excessive pollution created by power stations
3. governments setting minimum wages to relieve poverty
4. private ownership of firms making defence equipment

What is capital?

1. the ability to organise the factors of production
2. the energy used in production
3. the factory used in production
4. the money invested in a firm

The Chinese government is concerned about the level of poverty and the need for more resources in low-income regions of the country. As a result, it is increasing its expenditure in those regions and reducing it in high-income regions. Which economic concept does this government policy illustrate?

1. diseconomies of scale
2. market forces
3. opportunity cost
4. specialisation

A builder spends one hour travelling to and from work. He works 40 hours per week for $200. He is given a choice to work 50 hours a week for an extra $75. What would be the opportunity cost to the builder of working the extra hours?

1. the ability to increase his purchasing power
2. the additional time travelling to and from work
3. the increased hourly earnings of $7.50
4. the ten hours of leisure time