What is the fundamental problem that both producers and consumers face in economics?

• A. Perfect information
• B. Scarcity of resources
• C. Absence of opportunity cost
• D. Unlimited production capacity

Answer: (B)

Verified step by step guidance

1. Understand that the fundamental problem in economics arises because resources are limited while human wants are unlimited.
2. Recognize that this limitation means both producers and consumers cannot have everything they desire, leading to the need for making choices.
3. Identify that this situation is known as 'scarcity of resources,' which forces decision-making about how to allocate resources efficiently.
4. Note that perfect information, absence of opportunity cost, and unlimited production capacity are not the fundamental problems but rather conditions or assumptions that may or may not hold in economic models.
5. Conclude that scarcity is the core issue that underpins all economic activity, as it necessitates trade-offs and prioritization for both producers and consumers.