A remote island community possesses a fixed acreage of arable land and a constant labour force. The community must decide how to divide these resources between cultivating staple food crops and building sustainable eco-lodges.
Which statement correctly identifies the nature of the fundamental economic problem facing this community and how it must be resolved?
Because its productive resources are finite while wants are unlimited, the community must make trade-offs and decide what combination of goods to produce, how to produce them, and for whom they are distributed.
The fundamental problem of scarcity arises solely from the absence of a market price mechanism, meaning it can be resolved by transitioning from a traditional economy to a free-market system.
By achieving full employment of all available land and labour, the community can successfully eliminate the opportunity cost associated with its production decisions.
Scarcity is a temporary developmental stage that the community can completely overcome once agricultural productivity is high enough to satisfy all basic survival needs.
123 exam-style questions on AQA A Level Economics 1.1 Economic methodology and the economic problem, covering 1.1.1 Economic methodology, 1.1.2 The nature and purpose of economic activity, 1.1.3 Economic resources, 1.1.4 Scarcity, choice and the allocation of resources, and 1.1.5 Production possibility diagrams. Each one has a worked solution and a mark scheme showing where the marks go.