Scarcity Practice Test

Given the economy-wide constraints described, a country has a fixed amount of arable land and freshwater that together can support either up to 30 million tons of staple crops or up to 18 million tons of water-intensive export crops this year, but not both at their maximum levels. The government’s targets are 30 million tons of staples to stabilize domestic food supply and 18 million tons of export crops to maintain foreign exchange earnings. Meeting both targets simultaneously would require more arable land and water than the country has available. Which concept best explains the limitation described?

Based on the limited resources facing the economy, a country has 6 million hectares of irrigated farmland and a fixed water allocation that cannot be expanded in the next decade. The same land and water can be used for (1) staple grains for domestic consumption or (2) water-intensive export crops. Agricultural planners estimate that meeting domestic grain targets requires 4.5 million hectares, and meeting export targets requires 3.0 million hectares, but both targets are desired simultaneously. Given the economy-wide constraints described, which fundamental economic problem is illustrated by this situation?