Economic Problem and Factors of Production Test

Which terms summarise the nature of the economic problem?

• finite resources and limited wants

• finite resources and unlimited wants

• infinite resources and limited wants

• infinite resources and unlimited wants

Which statement about the factors of production is correct?

• A river from which a company draws water is called land.

• Raising finance for a company is called capital.

• Supervisors employed in a company are called enterprise.

• The owner of a company is called labour.

Which combination of resources and wants causes the economic problem?

• resources limited wants limited

• resources limited wants unlimited

• resources unlimited wants limited

• resources unlimited wants unlimited

What does an economist mean by capital?

• man-made goods that do not directly satisfy human wants

• money used to set up new businesses and expand existing businesses

• natural resources that will not be replaced

• the ability to earn profits by combining resources to produce goods

A tractor factory runs out of important components and has to stop production.

How does this illustrate the economic problem?

• The factory lacks a competitive advantage.

• The factory lacks economies of scale.

• There are limited wants.

• There is evidence of scarce resources.

Why will the economic problem never be solved?

• People will always want more products than can be produced.

• People will never agree on what is the best economic system.

• There will always be an uneven distribution of income.

• There will always be some people unemployed.

Reena makes a living by selling paintings of the town in which she lives. She sells them in an open-air market once a week.

In order to be able to sell more pictures in a week she decides to buy a studio, pay someone to help in the studio and try to increase demand by advertising in the local paper.

Which factors of production were changed?

• capital and enterprise

• enterprise and labour

• labour and capital

• labour only

What is most likely to reduce the supply of factors of production in an economy?

• increasing the age of retirement

• introducing new methods of irrigation

• lowering the cost of borrowing from banks

• raising the rate of tax on profits

What is a factor of production?

• a semi-skilled, young worker

• direct taxes received by a government

• shares in a manufacturing company

• stocks of money held a bank

The following are four ways factors of production are used.

What is likely to require the greatest use of the factor enterprise?

• a carpenter making wooden articles in his leisure time for sale at a monthly market

• a corn farmer negotiating with other farmers to hire expensive machinery

• a food shop owner sometimes selling flowers in the shop

• a householder harvesting vegetables grown at home