Basic Economic problem
1.Which combination best describes the basic economic problem?
2. Why does the concept of scarcity apply to the use of fossil fuels?
A Demand fluctuates according to price changes.
B Supply is insufficient to meet demand.
C Their use is restricted because of harmful pollution.
D They are being replaced by renewable energy sources
3. Which activity illustrates the consumption of a ‘free’ good?
A a farmer using water taken from a river
B a patient visiting a medical facility provided by a charity
C a person breathing air in the countryside
D a person eating their birthday cake given as a gift by a friend
4. What is essential to eliminate scarcity?
A the existence of sufficient resources to meet all needs and wants
B producers consistently produce in excess of demand
C the government has a surplus budget
D there is equilibrium in all markets
5. A wine producer and bottler wanted to expand its production significantly. To finance
the expansion it offered the investors discount on restaurant meals if the bought 2000
shares in the company.
Which factors of production are most likely to be involved in this expansion?
A labour, land, capital and enterprise
B labour, land and capital only
C enterprise and land only
D enterprise only
6. Which type of good does not consume scarce resources?
A economic good
B free good
C merit good
D public good
7. The factors of production earn different rewards.
What identifies the correct economic term for these rewards?
A capital – surpluses
B enterprise – dividends
C labour – interest
D land – rents
8. A good is most suitable to be provided by the market if it is
A excludable and non-rival.
B excludable and rival.
C non-excludable and non-rival.
D non-excludable and rival.
9. Why does the basic economic problem of scarcity apply to both the rich and the poor?
A The choices people make are not dependent on income inequalities.
B Consumers pay the same prices for goods and services to satisfy their wants.
C Human wants exceed what can be produced from available resources.
D Natural resources are unevenly distributed amongst nations.
10. What is ‘a produced means of further production’?
A capital
B enterprise
C labour
D land
11. Which factor of production is needed first in order to set up a new business?
A capital
B enterprise
C labour
D land
12. People plant flowers in a local park.
Which statement is correct?
A Flowers in parks are a public good because people can enjoy them at no charge.
B Flowers in parks are a public good because they are owned by local people and are not for
profit.
C Flowers in parks are not a public good if local people can limit the number of visitors to their
parks.
D Flowers in parks are not a public good if they are individual, not identical, in nature.
13. What will help solve the basic economic problem?
A the control of the market system
B the efficient allocation of scarce resources
C the preservation of a healthy environment
D the elimination of hunger
14. What is an example of a free good?
A a government sponsoring a free vaccination programme for its citizens
B a hospital providing free treatment to the poor
C a school providing free education to outstanding students
D anything that provides free utility but is not scarce
15. Economics students have to fill in the gaps in the following passage.
‘The three basic questions arising from the economic problem of scarcity are ......1...... to
produce, ......2...... to produce, and ......3...... to produce.’
Which combination is correct?
16. Which term assumes the existence of ‘qualities, knowledge and skills’ that allow an
individual to be more productive?
A enterprise investment
B human capital
C mechanisation
D specialization
17. A local council provides a tap for drinking water in a town.
Would this make drinking water a free good?
A No, because it is possible to exclude some people from using the tap.
B No, because it requires the use of scarce resources.
C Yes, because it is available to all passers-by.
D Yes, because it is impossible to charge for it.
18. Which action would not raise the quality of the particular factor of production?
A capital – operating a machine continuously at full capacity
B enterprise – providing risk management advice
C land – increasing the use of fertilisers
D labour – making apprenticeships and training compulsory
19. A tourist visits the coast for a holiday. On her first day, she visits the local tourist office for
information, goes for a swim in the sea spends the evening enjoying the view of the coastline and
rents a campsite for an overnight stay. Which activities involve economic goods and which involve
free goods?
20. What do economists regard as the reward for taking risks and organising production?
A enterprise
B interest
C wages
D profit
21. 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
22. A European airline opens a new route to Dubai. It purchases additional aeroplanes, rents
additional landing slots, hires pilots and buys back some of its shares to raise the value of the firm on
the stock market. What is an example of the factor of production capital?
A aeroplanes
B landing slots
C pilots
D shares
23. Which statement about the factors 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.
