1. Business activity

1 Which of these is the best definition of the ‘economic problem’?

• 1) People do not have enough money

• 2) There are not enough resources to satisfy people’s unlimited wants

• 3) There are not enough wants for the unlimited resources to satisfy

• 4) There are too many factors of production

Which of the following is not a factor of production?

• 1) Oil reserves

• 2) Factory buildings

• 3) Skilled labour

• 4) Music CDs

If I buy a book for $10 then the opportunity cost is:

• 1) everything else I could have bought with the $10

• 2) $10

• 3) the benefit lost from not being able to consume the next best option

• 4) the benefit gained from buying the book

Making choices is necessary in all economic systems because:

• 1) there are so many products that we cannot use them all at once

• 2) the government has so much money that it does not know what to do with it

• 3) there are so many resources compared to people’s needs that we have to choose which ones not to use

• 4) there are so many wants compared to scarce resources that we have to decide what to produce

Division of labour can be defined as:

• 1) workers specialise on just one task and become more efficient at it

• 2) workers become specialist in all jobs

• 3) all firms only have one worker so jobs are divided between the firms

• 4) no workers are employed as machines always do all the work

One of the drawbacks to specialisation is that:

• 1) output and efficiency falls

• 2) workers spend time on training to do several different jobs

• 3) workers can become bored through only concentrating on one job

• 4) no machinery is used and this slows down production

7 One of the benefits of specialisation is:

• 1) output and efficiency increases

• 2) workers are able to undertake a range of tasks

• 3) no machinery is used which saves on business costs

• 4) workers do not have to spend time training to do a particular

The best definition of a business is an organisation that:

• 1) is owned by the government

• 2) buys products from other firms and sells them to consumers for a profit

• 3) produces only those goods and services that satisfy people’s basic needs

• 4) combines the factors of production to make products that satisfy people’s wants

Which one of the following is the best definition of added value?

• 1) It is the difference between the prices of different products

• 2) It is the difference between the total costs of a business and the total value of what it sells

• 3) It is the difference between the price of a product and the cost of the bought in materials needed to make it

• 4) It is the difference between the price of a product and the value of it

If a tailor buys in cloth for $25 and makes a suit that he sells for $65 then he has:

• 1) made a profit on the suit of $40

• 2) added $40 of value to the material

• 3) incurred no opportunity cost in making the suit

• 4) used his own labour as the only factor of production in making the suit