Which one of the following is the most likely reason why a city council must make choices about its spending in 2022? A: All public services have unlimited ...
Question 1 Report
Which one of the following is the most likely reason why a city council must make choices about its spending in 2022?
A: All public services have unlimited resources.
B: Resources are scarce but wants are unlimited.
C: Taxes always decrease when government spending increases.
D: Economic growth removes unemployment immediately.
(a) Which option identifies the basic economic problem? [1]
(b) Explain why the council faces an opportunity cost when it increases spending on flood defences rather than libraries. [3]
Answer Details
(a) The basic economic problem is that resources are scarce but wants are unlimited. [1] This scarcity means the council cannot fund every desired public service.
(b) The council has limited tax revenue and resources. [1] If it allocates more resources to flood defences, [1] fewer resources are available for libraries. The lost library provision is the opportunity cost. [1]
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