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Economics: Law of Scarcity

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Questions and Answers

What is the fundamental principle of the Law of Scarcity?

Resources are infinite, but wants are finite

Resources are infinite, and wants are infinite

Resources are finite, and wants are finite

Resources are finite, but wants are infinite (correct)

What is the implication of infinite resources?

Resources would be wasted

Everything would be free (correct)

There would be no economic problem

Everything would be expensive

What is the definition of Economics based on the Law of Scarcity?

The study of the production and distribution of goods and services with unlimited wants and needs

The study of the production and distribution of goods and services to satisfy humans' finite wants and needs with scarce resources (correct)

The study of the production and distribution of goods and services to satisfy humans' finite wants and needs with infinite resources

The study of the production and distribution of goods and services with infinite resources

What does the Production Possibility Frontier (PPF) show?

The maximum amount of production that can be obtained by an economy given its technological knowledge and quantity inputs Signup and view all the answers

What happens when a country is operating on its Production Possibility Frontier (PPF)?

It is allocating resources efficiently Signup and view all the answers

What is the primary reason for the generation of the Production Possibility Frontier (PPF)?

The Law of Scarcity Signup and view all the answers

Study Notes

Law of Scarcity

Economic resources (factors of production) are not infinite, including land, labor, capital, and talent/entrepreneurship.
If resources were infinite, everything would be free, but since they're not, scarcity exists.
The Law of Scarcity is a fundamental concept in economics, emphasizing that resources are limited.

Definition of Economics

Economics is the study of the production and distribution of goods and services to satisfy humans' finite wants and needs with scarce resources.

Production Possibility Frontier (PPF)

PPF is generated due to the Law of Scarcity.
PPF shows the maximum amounts of production that can be obtained by an economy given its:
- Technological knowledge
- Quantity of inputs or resources available
When a country operates on its PPF, it is allocating resources efficiently.

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Description

This quiz covers the concept of the Law of Scarcity in economics, which states that economic resources are limited and not infinite. Test your understanding of this fundamental principle.