What is classified as one of the four economic resources?
consumption
enterprise
production
trade
Which statement about factors of production is correct?
Capital is the amount of money borrowed from a bank.
Labour is output made by an employee.
Land includes commercially grown rice crops.
Profit is the reward for enterprise.
In farming, what is an example of what economists call capital?
savings the farmer has in the bank
shares in a farming company
the money the farmer set aside to pay taxes
the tractor owned by the farmer
What would an economist regard as an example of the factor of production capital?
an individual’s purchase of stocks and shares
borrowing by a firm to pay for electricity
the building by a firm of a new factory
total savings by individuals in a country
Sam wrote a list of how he would prefer to spend his Saturday afternoon. What was the opportunity cost of going to the cinema?
going to a cricket match
watching the annual town parade
visiting relatives
losing his Saturday free time
In recent years more golf courses, which use large quantities of water, have opened in China. What may be the opportunity cost of this?
cost of water
loss of farmland
sales of golf equipment
wages of golf course staff
The diagram shows a production possibility curve (PPC). Why is the curve usually drawn like this?
International free trade exists.
Opportunity cost changes.
Resources are unlimited in supply.
Some resources will be unemployed.
Countries X and Y have identical resources. The diagram shows their production possibility curves. What can be concluded from the diagram?
X can produce food and drink more cheaply than Y.
X experiences higher unemployment than Y.
Y can produce food and drink more efficiently than X.
Y has higher retail prices than X.
An economy produces capital goods and consumer goods. At which point will the economy show the highest potential for sustained long run economic growth?
Point A
Point B
Point C
Point D
What would cause an outward shift of a country’s production possibility curve (PPC)?
a fall in unemployment
an increase in the rate of income tax
an increase in the labour force
a reduction in expenditure on education
What is meant by the equilibrium price in the market for a good?
the average price paid by consumers
the price at which maximum profit is made
the price at which the producer breaks even
the price at which the supply and demand curves intersect
What can be concluded from the demand curve for the product shown in the diagram?
Price increases will raise the producers’ revenue.
Producers are unable to respond to a price rise.
The product is one with many substitutes.
There are 20 people able to buy the product.
What can cause the supply curve for a product to shift to the right?
an increase in demand for the product
an increase in government subsidies to producers
an increase in indirect taxes on the product
an increase in the costs of production
What would happen to the equilibrium price if the quantity supplied increased by 200 units at each price?
It would decrease by $1.
It would decrease by $2.
It would increase by $1.
It would increase by $2.
A product has a price elasticity of demand of –0.5. What happens to the demand for a product if its price falls from $1 to $0.80?
It decreases by 10%.
It decreases by 20%.
It increases by 10%.
It increases by 20%.
What causes market failure?
government provision of services
social costs equal private costs
the existence of external benefits
the existence of perfect competition
Cuba is implementing free market reforms. What is a likely advantage of this?
a wider variety of goods and services produced
greater equality between the different groups in society
increased provision of public goods
less consumption of goods with external costs
What can be found in a market economy?
externalities and monopolies
interest rates and public goods
public corporations and market prices
tax rates and commercial banks
Which pair of economic institutions can be found in a market economy?
local government and charities
monopolies and commercial banks
nationalised industries and partnerships
stock exchange and public corporations
What aspect of demerit goods means they are overproduced?
clear product information
high external costs
high product taxes
low customer demand
Which situation indicates a mixed economy?
Economic activity is controlled entirely by the private sector.
Individual choices are unaffected by government actions.
Services are provided by both private and public sectors.
The government carries out all planning and decision making.
In a city, what is most unlikely to be provided by the private market system?
a museum
a school
a sports field
street lights
What is most likely to increase the occupational mobility of labour?
building more houses
increased spending on re-training schemes
increased total government spending
increasing the information on job availability
The diagram shows the market for a good. The government fixes a minimum price for the good at P2. What will happen in the market as a result?
The market equilibrium will remain the same.
The quantity demanded will rise to Q2.
The quantity supplied will fall to Q3.
There will be an excess supply.