Scarcity

What must be true for a resource to NOT be scarce?

• It must be free.

• It must be labor.

• One person’s consumption of a resource interferes with another’s consumption of that resource.

• It must be capital.

• It must be non-rival.

Answer explanation

In order to be scarce it must be rival in consumption, therefore it must be non-rival in order to not be scarce. A resource is rival if one person’s consumption interferes with someone else’s ability to consume it. If a good is rival, one person using it means another person cannot also use it, leading to scarcity.

Which of the following best describes the difference between microeconomics and macroeconomics?

• Microeconomics is about individuals, households, and firms; Macroeconomics is about economies as a whole

• Microeconomics is about efficiency; Macroeconomics is about equity

• Microeconomics is about markets for financial assets; Macroeconomics is about markets for the factors of production.

• Microeconomics is about how much total output there is in an economy; Macroeconomics is about how much individual firms produce.

Answer explanation

The prefix "micro" means small. Microeconomics deals with small agents. The prefix "macro" means large or big. Macroeconomics deals with the bigger picture of an economy as a whole.

What does it mean to say that a resource is scarce?

• A society does not have enough money to purchase this resource.

• Nobody wants to buy this resource

• There is an unlimited amount of the resource available

• There is not enough of this resource to satisfy all the wants and needs of a society.

• The resource is no longer available.

Answer explanation

Scarcity refers to the conflict that arises from competition over a society's limited resources.

 

Which of the following is NOT a microeconomic question?

• How does a mother’s education influence a child’s health?

• How do labor unions influence wages in the trucking industry?

• How should a firm respond if it knows a competing firm will advertise?

• What happens to a firm’s revenue if they increase a good’s price?

• How is the unemployment rate related to business cycles?

Answer explanation

The relationship between the unemployment rate and the business cycle is a macroeconomic question because macroeconomic questions deal with problems facing the entire economy. Microeconomic questions deal with decision-making by individuals, households, and firms.

Which of the following best captures the idea of the fundamental economic problem?

• Lack of demand for limited resources.

• Limited resources and unlimited wants.

• Limited wants and limited resources.

• nlimited resources and unlimited wants.

Answer explanation

The unlimited wants of humans results in the problem of scarcity, which any economic system must address.

What are the four categories of resources?

• Machines, technology, minerals, and energy resources

• Land resources, labor, capital goods, and entrepreneurship

• Information technology, physical capital, financial capital, and high skilled workers

• High skilled workers, low skilled workers, knowledge workers, and service sector workers

Answer explanation

Natural resources (land), workers (labor), technology (capital) and entrepreneurial ability are the four resources that any economic system must allocate.