Quiz 1: What Is Economics


Scarcity of resources: Resources are called factors of production, which are necessary to produce goods and services. The availability of resources according to the consumer's requirement determines whether the resource is scarce or not. Scarce resources are not available freely and its price is more than zero. With limited resources, economies have to meet the unlimited wants of human beings. Hence, economics takes decision about the better utilization of limited resources to optimize the consumer's utility. Economic problems arise because of the scarce nature of resources; hence, scarcity is important in the definition of economics.

a.Capital: Since taxi is a manufactured product which is used to provide transport service, it is a capital. b.Capital: Computer software is a manufactured product which is used for production; hence, it is a capital. c.Labor: One hour of legal counsel requires human mental effort; hence, this is a labor. d.Capital: Land and some other materials are required to make a parking lot; hence, this is a combination of natural resources and capital. e.Natural resources: Since forest is a bunch of trees and it's a gift of nature, it belongs to natural resources. f.Natural resources: The Mississippi River is a gift of nature, and it belongs to natural resources. g.Labor: Introducing a new way to market products on the Internet requires marketing skills and other strategies, and it is considered as entrepreneurial ability.

a.Cost involved in food vouchers: Even though the food vouchers are free to consume, resources are involved to produce it. Hence, food vouchers are not a free good. b.Donating country bears the cost of aid: A country that aids a developing country, bears the cost of the resources that assist the developing country. Hence, the aid given by a country is not free. c.Charity donated out of profit: A corporate's contribution to any charitable trust is out of its profit that is derived from its production process. Hence, it is not a free good. d.Cost involved in preparing a TV program: Even if the program is free to the subscribers, cost is involved in preparing it. Hence, this is not a free service. e.Cost borne through tax: The expenses of public school education are bo rne by the citizen through tax ; hence, it is not a free service.

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