Class 9 Problems of an Economy Mock Test (ICSE)

Topics in Problems of an Economy

• Scarcity of resources
• Central problems: what, how and for whom to produce
• Choice and opportunity cost
• Production possibility curve

Problems of an Economy practice questions with answers

1. Q1Multiple choice·1 mark
   A downward-sloping concave Production Possibility Curve (PPC) illustrates:

   1. (a)zero opportunity cost.
   2. (b)increasing opportunity cost.
   3. (c)constant opportunity cost.
   4. (d)decreasing opportunity cost.
   Show answer and step marks

   1. Correct option: (b) increasing opportunity cost.+1

   Answer: (b)
2. Q2Multiple choice·1 mark
   Which of the following best describes why scarcity is considered a universal problem affecting both developing and developed nations?

   1. (a)Every nation faces shortages of goods from time to time during droughts, wars or crop failures.
   2. (b)Developing nations have too few resources, while developed nations waste the resources they have.
   3. (c)Prices of goods keep rising in every nation, so people cannot afford all the goods they want.
   4. (d)Human wants exceed the resources available in every nation, whatever its level of development.
   Show answer and step marks

   1. Correct option: (d) Human wants exceed the resources available in every nation, whatever its level of development.+1

   Answer: (d)
3. Q3Multiple choice·1 mark
   Opportunity cost can be defined as:

   1. (a)the total cost of production of a commodity.
   2. (b)the cost incurred by the government on public welfare.
   3. (c)the monetary value of all alternatives sacrificed.
   4. (d)the value of the next best alternative foregone.
   Show answer and step marks

   1. Correct option: (d) the value of the next best alternative foregone.+1

   Answer: (d)
4. Q4Multiple choice·1 mark
   The central economic problem of 'for whom to produce' is primarily concerned with:

   1. (a)choosing between labour-intensive and capital-intensive methods of production.
   2. (b)determining the total volume of goods to be exported to international markets.
   3. (c)the distribution of produced goods and services among various individuals and groups in society.
   4. (d)deciding the proportion of consumer goods versus capital goods to manufacture.
   Show answer and step marks

   1. Correct option: (c) the distribution of produced goods and services among various individuals and groups in society.+1

   Answer: (c)
5. Q5Long answer·4 marks
   Every economy faces certain basic or central economic problems because human wants are unlimited while resources are scarce. Explain the three central problems faced by an economy.
   Show answer and step marks

   1. What to produce: deciding which goods and services to produce and in what quantities.+1
   2. Example: choosing between consumer goods and capital goods, or necessities and luxuries, according to society's priorities.+0.5
   3. How to produce: choosing the technique of production, labour-intensive or capital-intensive.+1
   4. The technique chosen should give the most output at the least cost with the resources available (e.g. labour-intensive methods where labour is plentiful).+0.5
   5. For whom to produce: deciding how the goods and services produced are distributed among different people and groups.+0.5
   6. This depends on the distribution of income, that is, on people's purchasing power.+0.5

   Answer: What to produce (which goods and how much, e.g. consumer or capital goods); how to produce (labour-intensive or capital-intensive technique, chosen for least cost); for whom to produce (how output is distributed, which depends on the distribution of income).

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