:::center
**Figure 1**
![EC0366 fig1](question:5d4bffd3-29de-49de-b75e-0f37331c1923)
:::

:br

1.  Describe the opportunity costs faced by the economy shown in **Figure 1**. :marks[2]

:br

2.  Using **Figure 1**, describe how a production possibilities curve illustrates the concepts of scarcity and opportunity cost.  :marks[3]


Which of the following is **not** one of the basic economic questions?

:br

::indent
- A. $\hspace{1em}$ Why to produce?

- B. $\hspace{1em}$ How to produce?
- C. $\hspace{1em}$ What to produce?
- D. $\hspace{1em}$ For whom to produce?


Assume a hypothetical complex and open economy. 

From the following list, identify the leakages from the economy's circular flow of income:

::indent
- I. $\hspace{1em}$ Taxes
- II. $\hspace{.7em}$ Export revenue
- III. $\hspace{.4em}$ Saving

:br

::indent

- A. $\hspace{1em}$ I only

- B. $\hspace{1em}$ I and III only
- C. $\hspace{1em}$ I, II, and III
- D. $\hspace{1em}$ II and III only


Which of the following statements is **not** true about the circular flow of income model?

:br

::indent
- A. $\hspace{1em}$ It illustrates interdependence between various economic agents interacting within an economic system

- B. $\hspace{1em}$ It shows the inputs, outputs, income, and expenditure flowing within an economy, along with multiple leakages and injections
- C. $\hspace{1em}$ If injections are smaller than leakages then national income will tend to decrease
- D. $\hspace{1em}$ If injections increase, then leakages will tend to decrease


Despite showing resilience to the global economic depression starting in 1929, the Soviet planned economy was unable to withstand the test of time. Output from its free market capitalist counterparts regularly far exceeded its own economic growth rates. The lack of dynamic growth in the Soviet economy has been mirrored in modern contexts when looking at the economies in countries such as North Korea and Cuba.

:br

Outline the differences in how free markets and planned economies answer the basic economic questions. :marks[3]

Identify which of the following is **not** a feature of a mixed economy.

:br

::indent
- A. $\hspace{1em}$ private ownership of the factors of production

- B. $\hspace{1em}$ resource allocation is influenced by the desire for profit
- C. $\hspace{1em}$ forces of demand and supply allocate resources
- D. $\hspace{1em}$ government officials decide how to distribute output


Which of the following is **not** a free good?

:br

::indent

- A. $\hspace{1em}$ Sunshine 

- B. $\hspace{1em}$ Rain
- C. $\hspace{1em}$ Fresh air
- D. $\hspace{1em}$ Free school lunches


Which of the following correctly states an example of land and an example of capital?

:br

:::tableoptions{col1="hide"}
| | Land | Capital |
| :-: | :-: | :-: |
| $\hspace{1.5em}$A.$\hspace{1.5em}$| Natural gas | A manager |
|$\hspace{1.5em}$B.$\hspace{1.5em}$ | Pesticides | A factory |
| $\hspace{1.5em}$C.$\hspace{1.5em}$ | Wild fish | An oven |
| $\hspace{1.5em}$D.$\hspace{1.5em}$ | A tractor | An MRI machine |

Which of the following statements can be true of a free-market economy?
::indent
- I. $\hspace{1em}$ Resources are owned by private individuals
- II. $\hspace{.7em}$ Income is distributed on the basis of individual's productivity
- III. $\hspace{.4em}$ A free-market economy results in unequal distribution of income 

:br

::indent
- A. $\hspace{1em}$  I only

- B. $\hspace{1em}$  I and II only
- C. $\hspace{1em}$  II and III only
- D. $\hspace{1em}$  I, II, and III


Which of the following statements correctly describe the circular flow of income model?

::indent
- I. $\hspace{1em}$ Import spending is a leakage; export revenue is an injection
- II. $\hspace{.7em}$ Investment spending is an injection; saving is a leakage 
- III. $\hspace{.4em}$ Wages are the factor payment for labour
- IV. $\hspace{.4em}$ Interest is the factor payment for  entrepreneurship 

:br

::indent
- A. $\hspace{1em}$ I only

- B. $\hspace{1em}$ I and II only
- C. $\hspace{1em}$ I, II, and III only
- D. $\hspace{1em}$ I, II and IV only


What allocates resources in a fully planned economy?

:br

::indent
- A. $\hspace{1em}$ The choices of consumers

- B. $\hspace{1em}$ The functions of the price mechanism
- C. $\hspace{1em}$ The problem of scarcity
- D. $\hspace{1em}$ The decisions of government officials


Identify the key concept associated with each statement:
::indent
- I. $\hspace{1em}$ Human wants are unlimited and exceed what can actually be produced to fulfil these wants
- II. $\hspace{.7em}$ Resources should be used in the best possible way for society, ensuring minimum waste
- III. $\hspace{.4em}$ Resources should be used in a way that does not limit future generations from also benefiting from the resources

:br

:::tableoptions{col1="hide"}
| | Statement I | Statement II |Statement III|
| :-: | :-: | :-: | :-: |
| $\hspace{1.5em}$A.$\hspace{1.5em}$| Sustainability | Equity | Interdependence|
|$\hspace{1.5em}$B.$\hspace{1.5em}$ | Scarcity | Efficiency | Sustainability |
| $\hspace{1.5em}$C.$\hspace{1.5em}$ | Efficiency | Scarcity |Economic well-being|
| $\hspace{1.5em}$D.$\hspace{1.5em}$ | Scarcity | Equity |Efficiency|


:br

:::center
![EC0014](question:b41b7914-28ab-47bd-9a20-05ca44705493)
:::

Which of the following would cause the shift from PPC$_1$ to PPC$_2$ in the diagram above?

:br

::indent

- A. $\hspace{1em}$ A fall in unemployment

- B. $\hspace{1em}$ A natural disaster
- C. $\hspace{1em}$ A rise in labour productivity
- D. $\hspace{1em}$ Migration from the country


Which of the following statements is true?

:br

::indent
- A. $\hspace{1em}$ Households only receive wages, rent, and interest as flows of income.

- B. $\hspace{1em}$ The payment to capital is profit.
- C. $\hspace{1em}$ In an open economy, all income is spent on domestically produced goods and services.
- D. $\hspace{1em}$ Government spending can be greater than tax revenue. 


The 2 sector circular flow of income model shows:

:br
::indent
- A. $\hspace{1em}$ injections increase national output

- B. $\hspace{1em}$ income equality
- C. $\hspace{1em}$ the flow of money from households to firms but not vice-versa
- D. $\hspace{1em}$ income flows to owners of factors of production


:::center
![image](question:8f72ae41-da5f-4094-bb07-c00350ace137)
:::

Referring to the PPCs above, identify the factors that would cause the changes illustrated in Figure 1 and Figure 2.

:br

:::tableoptions{col1="hide"}
| | Figure 1 | Figure 2 |
| :-: | :-: | :-: | 
| $\hspace{1.5em}$A.$\hspace{1.5em}$| an increase in the quantity of resources | an increase in the quality of resources | 
|$\hspace{1.5em}$B.$\hspace{1.5em}$ | an increase in the quality of resources | an increase in the quantity of resources | 
| $\hspace{1.5em}$C.$\hspace{1.5em}$ | an increase in the quality of resources | a reduction in unemployment |
| $\hspace{1.5em}$D.$\hspace{1.5em}$ | a reduction in unemployment | an increase in the quantity of resources |




:::center
![image](question:fcdf35bc-1f07-4ecd-a74e-01ea99e3faf7)
:::

An economy is initially producing the combination of consumer goods and producer goods shown by point **X**. If there is no change in the quantity or quality of the factors of production, which new point represents a change toward producing more consumer goods?

:br

::indent
- A. $\hspace{1em}$ A

- B. $\hspace{1em}$ B

- C. $\hspace{1em}$ C

- D. $\hspace{1em}$ D

Though it is the world's largest vanilla producer and rich in minerals like nickel and gold, Madagascar faces persistent poverty, slow economic growth, and poor governance. Agriculture, fishing, and forestry dominate the economy: seventy per cent of the labour force works in these sectors. Eighty per cent of the country's population lives below the poverty line of US\$1.90 per day.

In contrast, Denmark is a mixed economy that enjoys high living standards and an annual per capita income of over US\$60 000. Its economy is focused on services, trade, and manufacturing, while only a small part of the population is employed in agriculture and fishing.
    
1. Explain how the economic concept of (relative) scarcity is likely to differ between the economies of Madagascar and Denmark. :marks[3]

2. Explain why Madagascar and Denmark both face the problem of scarcity despite the difference in their levels of economic development. :marks[3]

3. Explain the opportunity cost that Denmark and Madagascar would face if each government decided to build a new international airport in its capital city. :marks[4]

Scarcity, Choice, Opportunity Cost, Production Possibilities Curve, Circular Flow Model

These case studies are designed to help IB Economics Higher Level students prepare for Paper 2 and Paper 3. The case studies will range from full Paper 2 and Paper 3-style questions to smaller case studies focused on particular syllabus topics and subtopics. Each case study includes sample answers and markschemes to help guide you in answering these HL papers appropriately. 

Original Data Response Questions to develop skills in analysing and evaluating data that you need for Paper 2 and 3. 

Foundations

Foundations (all)

EC0162

EC0012

EC0160

EC0007

EC0021

EC0014

EC0158

EC0366

EC0370

EC0165

EC0166

EC0161

EC0023

Scarcity, Choice, and the PPC

EC0159

EC0178

EC0011

EC0013

EC0016

EC0157

EC0179

EC0015

EC0641

Economic Methodology, History of Economic Thought

How Economists Approach the World

EC0022

EC0163

EC0164

EC0024

EC0462

Microeconomics Part I

Demand, Supply, and Equilibrium

EC0218

EC0219

EC0216

EC0032

EC0136

EC0223

EC0220

EC0217

EC0133

EC0425

EC0451

EC0446

EC0376a

Elasticities

EC0228

EC0042

EC0034

EC0037

EC0169

EC0167

EC0502hl

EC0374

EC0368

EC0369

EC0376b

Law of Demand, Law of Supply, Determinants of Demand & Supply, Equilibrium, the Price Mechanism, Allocative Efficiency

Demand & Supply, Equilibrium

EC0135

EC0031

EC0033

EC0017

EC0134

EC0018

EC0019

EC0020

EC0215

EC0377a

EC0221

EC0222

EC0224

EC0460

EC0375

EC0559

EC0569

EC0570

EC0571

EC0642

EC0648

Price Elasticity of Demand (PED), Income Elasticity of Demand, Price Elasticity of Supply (PES)


IB Economics HL - Questionbank

Scarcity, Choice, and the PPC

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Question 7

Question 8

Question 9

Question 10

Question 11

Question 12

Question 13

Question 14

Question 15

Question 16

Question 17

Question 18

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