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CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics

A village has limited farmland that can be used to grow either wheat or sugarcane. Because the land cannot satisfy every possible use at once, the village must decide how to use it. Which feature of economic life does this situation chiefly illustrate?

The situation illustrates scarcity of resources relative to wants. The village has limited farmland that cannot serve every use simultaneously, so it must choose between wheat and sugarcane. Scarcity forces choice, and every choice involves giving up an alternative use of the land.

  1. AScarcity of resources relative to wantsCorrect
  2. BAbundance of free goods
  3. CAbsence of any opportunity cost
  4. DPerfect satisfaction of all wants

Explanation

Resources such as land are limited while the possible uses and wants are many, so choices must be made. This is the basic problem of scarcity. Free goods and absence of opportunity cost contradict the situation, since choosing wheat means giving up sugarcane.

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