Cambridge IGCSE® and O Level Economics Workbook Answers · 1 The basic economic problem 1 The correct answer is Option B. Resources in an economy are scarce and needs and wants (of individuals, firms and governments) are unlimited. Option A states that wants are limited and resources are unlimited which is incorrect as wants are unlimited and resources limited. See pages 2-3 in the textbook for a more detailed explanation of the basic economic problem. 2 The correct answer is Option A. Public domain web pages are available to anybody with access to the internet. Access therefore is unlimited. The other options (running shoes, housing and tennis rackets) are all limited in supply and are therefore economic goods. See page 2 in the textbook for more examples of economic and free goods. 3 The correct answer is Option C. Selling and distributing olive oil is in the tertiary sector of the economy. Options A and D are in the secondary sector as both are part of the manufacturing process. Option B (growing of olive trees) is in the primary sector. See pages 5-6 in the textbook for more detailed information on the three sectors of industry. 4 The correct answer is Option C. To increase production of wheat from W2 to W, it is necessary to decrease production of oil from O2 to O1. This is because the PPF represents the maximum amount of wheat and oil that can be produced at each level of output, with all resources used efficiently. Options A and B are incorrect because to increase production of wheat it is necessary to decrease oil production. Option D requires an increase in the productive capacity of the country. See pages 7-9 in the textbook for more detailed information on PPFs. 5 The correct answer is Option B. It is possible to increase production within the economy without incurring an opportunity cost, i.e. it is possible to increase both production of wheat and oil without any opportunity cost. Options C and D are on the production possibility curve and therefore represent maximum output in the economy. Point E is unattainable given the current resources in the economy. 6 Country X could invest in machinery and/or technology and this will increase the productive capacity of the economy as more oil and wheat can be produced with the same amount of resources. Country X could train workers to increase their skills and this may increase their productivity as workers become more efficient at producing oil and wheat. Award 2 x 2 marks for stating and explaining two ways to increase the productive capacity of Country X. See pages 132-133 and 217-218 in the textbook for more information on how to increase the productive capacity of the economy. 7 Examples of capital-intensive industries: car manufacturing and glass making. Examples of labour-intensive industries: garment manufacturing and teaching. Award 1 mark for each relevant example of each type of industry, up to the maximum of 2 marks. 8 Opportunity cost is the