IGCSE Econs Chapter 1

Which statement about the factors of production is correct?

• Capital is a financial resource and includes savings in banks.

• Enterprise is limited in supply and includes office workers.

• Labour is a human resource and includes pensioners and children.

• Land is a natural resource and includes trees and fish.

A builder spends one hour travelling to and from work. He works 40 hours per week for $200. He is given a choice to work 50 hours a week for an extra $75.

What would be the opportunity cost to the builder of working the extra hours?

• the ability to increase his purchasing power

• the additional time travelling to and from work

• the increased hourly earnings of $7.50

• the ten hours of leisure time

A country’s infrastructure was damaged by a natural disaster. Before the disaster, the country was producing at point Y on the production possibility curve (PPC).

Which point represents the country’s production immediately after the disaster?

• A

• B

• C

• D

A farmer sells land used for crops to a firm that will use the land for wind turbines to produce electric power.

What is the opportunity cost of this decision by the farmer?

• the cost of installing wind turbines

• the loss of revenue from crops that grow on the land

• the profit made from selling the land

• the reduced cost of producing renewable energy

The production possibility curve (PPC) shows the hours per day that a person has for either work or leisure.

This person works 6 hours a day but then decides to work 9 hours a day.

Which movement shows this change?

• T to R

• T to U

• U to V

• U to T

The table shows the maximum production possibilities for goods and services for a country.

The country originally produced only goods but now produces 20 million units of services. The country continues to operate at maximum production possibility.

What is the opportunity cost for this country?

• 20 million units of goods

• 100 million units of goods

• 20 million units of services

• zero

What is the basic economic problem?

• excess supply of goods and services

• lack of profits

• recession

• scarcity of resources

On which factor of production does innovation directly depend?

• decisions of entrepreneurs

• high inputs of capital

• long hours of manual labour

• plentiful supplies of land

The diagram shows an economy’s production possibility curve (PPC). The economy moves from point X to point Y.

What is the most likely effect of this change?

• Different quantities of the goods are produced.

• More people are employed

• There is an immediate fall in gross domestic product.

• There is an increase in investment.

What causes economic agents to make choices?

• limited needs and wants

• the existence of finite resources

• the existence of free goods

• the market mechanism