1.3 Factors of Production

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Sec.1 Basic Economic

Ideas 1.3
Factors of Production
Section 1: MCQ’S
1. A European airline opens a new route to Dubai. It purchases additional
airplanes, rents additional landing slots, hires pilots and buys back some
of its shares to raise the value of the firm on the stock market.
A.Airplane
B.Landing slots
C. Pilots
D. Shares
2. Professional gardeners now use power tools instead of hand tools to

maintain their customers’ gardens. What can be concluded from this
information?
A.Capital has replaced all labour for maintaining gardens.
B.Gardening has become more labour-intensive.
C.Land has become more productive.
D.New technology has been introduced.
3. Which statement about the factor of production is correct?

A.The factor capital includes shares and deposit accounts at banks.
B.The factor labour includes human-made resources.
C.The factor land includes forests and undiscovered copper.
D.The factor enterprise takes risks and is rewarded with interest.
4. What is the payment received for the use of capital?

A.Interest
B. Profit
C. Rent
D. Wage
5. What do economists regard as the reward for taking risks and organizing
production?
A.Enterprise
B. Interest
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C. Wages
D. Profit
6. A UK based food company wishes to diversify its product range. To

finance this, it has obtained a $10m loan from a bank to buy land, build
and equip a bakery.
What would not be classified by an economist as a factor of production?
A.The $10m loan used to finance the project
B.The land on which the bakery will be built
C.The ovens required to bake the bread
D.The soya used in the making of the bread
7. India is falling to reach its full economic potential because of poor rail,
road road and electricity infrastructure and a lack of skilled civil
engineers.
Which factors of production need to be increased?
A.Capital and land
B.Enterprise and capital
C.Labour and capital
D.Land and enterprise
8. The fundamental economic question is how to meet unlimited wants with

limited resources.
What is an example of limited resources?
A.Insufficient consumer goods in the local shops
B.Insufficient jobs to allow full employment
C.Insufficient machinery to produce electrical goods
D.Insufficient tax revenue to finance building a school
9. To overcome the problem of scarcity, countries with few natural

resources need to concentrate on the quality of human resources.
Which set of policies would be most appropriate?
Natural resource policy Human resource policy

A Develop renewable energy Improve education and training
supplies

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B Plan the allocation of Discourage automation

resources
C Protect land resources Protect jobs in manufacturing
D Restrict imports of raw Restrict influx of skilled migrants

materials
10. What term is used by economists for the income received by the of
production enterprise?
A. Capital
B. Interest
C. Profit
D. Revenue
11. In the twentieth century the nature of a typical car assembly plant
changed. The industry had fewer firms, they operated on larger sites and
they had more automated machinery.
How is this change most likely to have affected the relative use of factors
of production in the industry?
Increased relative use Decreased relative used

ACapital and enterpriseLabour and land
BEnterprise and labourLand and capital
CLabour and landCapital and enterprise
DLand and capitalEnterprise and labour
12. Which statement about factors of production is correct?

A.All economic output requires the use of four factors of production.
B.Capital may take the form of shares in a manufacturing company.
C.Enterprise can only be found in owner-run organizations.
D.Land includes both renewable and non-renewable resources
13. One of the central themes of economics is that resources are scarce.

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What is certain from this?

A.Difficult choices are unavoidable for economic agents.
B.Food shortages will become more severe over time.
C.Resources allocation cannot be left solely to the price mechanism.
D.There will be continuing upward trend in commodity prices.
14. Which statement about factors of production is correct?

A.All factors of production can earn income for their owner.
B.The factor capital includes human capital, money capital and
physical capital.
C.The factor labour involves only physical effort.
D.The natural resources classed as land are in unlimited supply.
15. What is not factor of production?

A.Fish stocks
B. Money
C.Oil reserves
D. Roads
16. Which factor of production and example are correctly linked?

Factors of productionexample
ACapital $1000 in a savings
account
B enterprise A company accountant
C labour A robot
D land The flow of river
17. What is an example of the factor of production capital?

A.A bank account held by a small firm to be use for future purchases
B.A forest of hardwood trees ideal for furniture making
C.The market value of a company’s shares
D.Word processing software used by a writer to complete her new
book

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18. What is the opportunity cost to an unemployed worker who becomes

employed?
A.The leisure they would otherwise have had
B.The value of the goods and services they produce
C.The wages they are paid
D. Zero
19. What distinguishes capital from other factor of production?

A.Capital exists only in capitalist market economics
B.Capital results from the operation of the other factors
C.The rewards earned by the owners of capital are uncertain
D.Unlike labour or land, capital must be owned rather than hired or
rented
20. Tom has setup his own business, which is based in premises owned by
Fanda. All machinery is hired from an equipment company. Both Tom
and Fanda are employed in the business.
What describes the earnings of Tom and Fanda?
Tom Fanda
A Rent and profit Interest and profit
B Wages and profit Wages and rent
C Interest and rent Rent and profit
D Wages and interest Wages and
interest
21. Which action by an individual would not be considered an action of the
factor of production of labour?
A.Leaving college to work on the land
B.Moving from a labour-intensive industry to work in a capital-
intensive industry
C.Setting up a new business in information technology
D.Undertaking a training course in computer skills

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22.What is necessarily a function of enterprise rather than management?

A.Accepting the risks involved in production
B.Deciding how much labour should be employed
C.Organizing the other factor of production
D.Promoting the sales of the product
23.A factory introduces an automated production line to take advantage of

division of labour.
What is most likely to increase?
A.average cost of production
B.job satisfaction of workers
C.range of skills of each worker
D.worker productivity
24.What is meant by the division of labour?

A.Each worker specializes in a different task in production.
B.Some workers work part-time and others work full-time.
C.The same amount of output per hour is produced by each worker.
D.Workers divide their time between different job
25.Which outcome depends upon the division of labour?

A.a decrease in boredom at work
B.a decrease in comparative advantage
C.a decrease in efficiency
D.a decrease in opportunity cost
26.A firm changes the type of product it produces.

What might limit the firm's ability to use division of labour?
A.The new production method is more capital intensive.
B.The new production method is very expensive.
C.The new product is made to specific customer requirements.
D.The new product requires specialized labour.
27.What is most important for the effective operation of the division of

labour in a modern economy?
A.a supply of money
B.finance from the government
C.highly qualified entrepreneurs

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D.integrated transport systems
28. What is necessary for effective specialization?

A.a barter system
B.a medium of exchange
C.a production possibility curve
D.a system of trade protection
29. A kitchen manufacturer wanted to become more efficient. It decided to

move to an industrial estate and to increase the division of labour in the
manufacture of its products.
Which statement about the division of labour is correct?
A. It occurs only in manufacturing industry.
B.It occurs only in market economies.
C.It occurs only when similar firms are located in the same area.
D.It occurs only when workers become more specialized.
30. What is most likely to be a result from the division of labour?

A.a decrease in job satisfaction
B.a decrease in productivity
C.an increase in the cost of living
D.an increase in unit labour costs
31. Why can division of labour benefit an economy?

Costs
A. of trading are reduced.
Individual
B. workers learn a wider range of skills.
Less
C. money is required as a medium of exchange.
The total supply of goods and services rises.
D.
32. Which type of firm is able to exploit division of labour to the greatest
extent?
A. bakery employing two workers making a range of bread and cakes
B. a motorcycle assembler employing two hundred workers making a
standardized model
C. a tailor employing ten workers making men's suits to order
D. a well-established furniture maker employing three hundred workers
making high quality individual items
33. Which group may be disadvantaged by the introduction of division of

labour?

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A.consumers who prefer standardized goods

B.companies where the production process has many sub-divisions
C.the government, if the product is taxed
D.workers who prefer a variety of tasks
34. What is the outcome for consumers and workers as a result of increased
division of labour?
Consumers workers
A less choice of goods wider range of skills
B fewer mass-produced wider variety of tasks
C goods lower prices of goods increased productivity
D lower quality of goods increased independence
35. What would prevent a firm gaining the maximum benefit from the
division of labour?
A.a high interest rates
B.a small market
C.high production costs
D.low productivity

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AS ECONOMICS

Sec.1 Basic Economic

2. Professional gardeners now use power tools instead of hand tools to

3. Which statement about the factor of production is correct?

4. What is the payment received for the use of capital?

MUHAMMAD ABUBAKAR BASHIR CONTACT: 0321-7962607

6. A UK based food company wishes to diversify its product range. To

8. The fundamental economic question is how to meet unlimited wants with

9. To overcome the problem of scarcity, countries with few natural

Natural resource policy Human resource policy

MUHAMMAD ABUBAKAR BASHIR CONTACT: 0321-7962607

B Plan the allocation of Discourage automation

D Restrict imports of raw Restrict influx of skilled migrants

Increased relative use Decreased relative used

DLand and capitalEnterprise and labour

12. Which statement about factors of production is correct?

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What is certain from this?

14. Which statement about factors of production is correct?

15. What is not factor of production?

16. Which factor of production and example are correctly linked?

17. What is an example of the factor of production capital?

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18. What is the opportunity cost to an unemployed worker who becomes

19. What distinguishes capital from other factor of production?

A Rent and profit Interest and profit

B Wages and profit Wages and rent

C Interest and rent Rent and profit

D Wages and interest Wages and

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22.What is necessarily a function of enterprise rather than management?

23.A factory introduces an automated production line to take advantage of

24.What is meant by the division of labour?

25.Which outcome depends upon the division of labour?

26.A firm changes the type of product it produces.

27.What is most important for the effective operation of the division of

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D.integrated transport systems

28. What is necessary for effective specialization?

29. A kitchen manufacturer wanted to become more efficient. It decided to

30. What is most likely to be a result from the division of labour?

31. Why can division of labour benefit an economy?

33. Which group may be disadvantaged by the introduction of division of

MUHAMMAD ABUBAKAR BASHIR CONTACT: 0321-7962607

A.consumers who prefer standardized goods

A less choice of goods wider range of skills

B fewer mass-produced wider variety of tasks

C goods lower prices of goods increased productivity

D lower quality of goods increased independence

MUHAMMAD ABUBAKAR BASHIR CONTACT: 0321-7962607

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