Work through the basic economic problem by connecting scarce resources, factors of production, opportunity cost and production possibility curves to real choices.
A government wants to build a new hospital.
What is most likely to prevent the government from doing this?
People in the country cannot afford healthcare.
People in the country would go abroad for healthcare.
The government cannot agree how big the hospital should be.
The government does not have enough money.
Which value does opportunity cost measure?
environmental damage
next best alternative forgone
output of labour
price paid
There are three key questions to be decided in determining resource allocation within an economy.
What does not relate to one of the choices in the three key questions?
whether all income groups receive the output
whether consumer or industrial goods are produced
whether economic goods or free goods are supplied
whether labour or capital is used in production
A country is producing at point X on its production possibility curve (PPC) which shows how it can allocate its production between capital goods and consumer goods.
A period of recession then causes some of its factories to close.
Which point could represent the country's new position?