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Explain the ways scarcity affects the choices made by Firms

Block Type

Knowledge Checkpoint

Knowledge checkpoint: Answer these actual Higher Economics exam questions:

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Explain the ways scarcity affects the choices made by Firms (2 marks)

firms have limited sales revenue so cannot produce all the goods/services they want to (1)
firms have to make choices about how to allocate resources to maximise their profits (1)
Example of an opportunity cost for firms (1)

(from Highers 2021 Assessment Resource Q3b(i))

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Explain the ways scarcity affects the choices made by Governments (2 marks)

governments have limited tax revenue so cannot provide all the services they want to (1)
governments have to make choices about how to spend revenue to maximise social welfare (1)
example of an opportunity cost for governments (1)

(from Highers 2021 Assessment Resource Q3b(ii))