Chpt. 3 – Factors of Production | Quiz

What are the factors of production?

• A) natural resources that are available for production

• B) another term for resources in an economy

• C) what are required in the future to produce goods and services

• D) the human resources used in the production of goods and services

Answer explanation

B

A and D are examples of different factors of productions. The wording of the question requires a more general answer.

C is not correct since it is not concerned with current resources in an economy.

The factor of production capital means:

• A) what is combined with land and labour to produce goods and services.

• B) the value of assets owned by a firm.

• C) money needed to set up a firm.

• D) money provided by shareholders to expand production in a firm.

Answer explanation

A

A recognises that factors of production are required to produce goods and services in an economy.

B, C and D consider capital in its monetary context; as a factor of production capital has a

wider meaning.

Which of these is the BEST explanation of how an economist describes an entrepreneur?

• A) someone who is lucky and makes a lot of money

• B) someone who succeeds in some but not all business activities

• C) someone who is in charge of a firm

• D) someone who seeks out business opportunities and is willing to take risks

Answer explanation

D

All options could apply to an entrepreneur. D is the ‘best’ one since it relates to the wider function of an entrepreneur, in particular the willingness to take risks.

Which of these is an example of land as a factor of production?

• A) an airline pilot

• B) an airfield

• C) an aeroplane

• D) aircraft fuel

Answer explanation

B

A and C are labour and capital respectively. Aircraft fuel is not strictly land as it has been

processed by other factors of production.

Specialisation can only occur when:

• A) a price has been agreed to buy and sell a product.

• B) a firm has modern methods of production.

• C) a firm is more efficient than all others in making a product.

• D) an entrepreneur sees a business opportunity.

Answer explanation

C

The point about specialisation is that it can only occur when a firm has an advantage over another firm in the same type of business. These advantages make the firm more efficient.

Three workers (A, B and C) are employed in a shoe factory. The table shows the output of each worker if they divide their time equally between the three stages in the production process.

Each worker is now asked to work on the part of the production process where they are a specialist. What would be the increase in the total production of shoes?

• A) 140 shoes

• B) 180 shoes

• C) 360 shoes

• D) 540 shoes

Answer explanation

C

Before specialisation, each worker produced 180 shoes, a total of 540 shoes. If each worker

specialises in that part of the production process where they are most efficient, each can produce 3 × 100 or 300 shoes, a total of 900 shoes. The increase in production is therefore 360 shoes.

Which reason is most likely to explain why an entrepreneur is prepared to take risks?

• A) to secure a large bank loan

• B) to realise a business ambition

• C) to justify giving up a safe job

• D) to increase their self-esteem

Answer explanation

B

All options are acceptable reasons why an entrepreneur is prepared to take risks. The ‘most likely’ one is B since this is why an entrepreneur is prepared to take risks to develop a business.