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Question 18 (1 point)

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In the context of economic principles and the role of business in society, explain how the concept of scarcity influences a nation's economic choices, using specific examples to illustrate its impact.

Question 18 options:

Scarcity forces nations to prioritize and make trade-offs in allocating resources.

Scarcity leads to a surplus of resources and abundance of opportunities.

Scarcity does not affect economic choices as long as there is government intervention

Scarcity is not a significant factor in economic choices.

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Answer 1

The correct option is:

Scarcity forces nations to prioritize and make trade-offs in allocating resources.

Explanation:

Scarcity is a fundamental economic principle that arises because resources are limited while human wants and needs are virtually unlimited. This mismatch necessitates that nations make choices about how to allocate their resources effectively. For example:

1. Resource Allocation: A government must decide whether to invest in healthcare, education, or infrastructure. If funds are allocated to improve hospitals, this may reduce the budget available for schools, demonstrating a trade-off between sectors.

2. Production Choices: Companies, due to limited resources such as labor and capital, must decide what products to manufacture. A car company might limit the production of SUVs to focus on electric vehicles, reflecting consumer demand and resource availability.

3. Opportunity Cost: The concept of opportunity cost—what is foregone when choosing one option over another—comes into play. For instance, if a country uses land to grow crops, it might sacrifice the ability to use that land for housing development.

In each case, scarcity pressures entities to make decisions that optimize the use of their limited resources while weighing potential benefits and costs. Thus, scarcity profoundly influences economic choices at both national and individual levels.