Lesson 4.1.1.2

4.1.1.2 The nature and purpose of economic activity Quiz: AQA Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

Lesson 4.1.1.2, The nature and purpose of economic activity: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

Host this setFree Play

The 20 questions

  1. What is the central purpose of economic activity?

    • To maximise the profits earned by firms and shareholders across the economy each year, with profit acting as the main measure of success.
    • To redistribute income from high earners to low earners through the tax and benefit system in each year of government spending.
    • To ensure that all prices in the economy remain stable over time, regardless of changes in demand or in the cost of production.
    • To produce goods and services that satisfy needs and wants.

  2. Which of the following is NOT one of the three key economic decisions?

    • Which government ministry should be funded.
    • What to produce, meaning the mix of goods and services that an economy chooses to make in each period of production and trade.
    • Who is to benefit from the goods and services produced, meaning how the output of the economy is shared among its members.
    • How to produce, meaning the combination of land, labour, capital and enterprise that firms use to make their goods and services.

  3. The decision 'who is to benefit from the goods and services produced' relates most directly to:

    • the level of unemployment in the economy and the number of workers who are without paid employment at any given time.
    • the distribution of output among consumers.
    • the choice of production technique used by firms to make their goods and services in each period of the economic cycle.
    • the amount of capital employed by firms in the production of goods and services across the whole of the economy each year.

  4. A country decides to shift resources from producing cars to producing wind turbines. Which key economic decision does this change mainly address?

    • How to produce.
    • Whether to trade internationally.
    • What to produce.
    • Who is to benefit.

  5. A firm switches from labour-intensive to capital-intensive production. Which key economic decision is this?

    • Whether to export.
    • What to produce.
    • How to produce.
    • Who is to benefit.

  6. Which statement best explains why the purpose of economic activity is linked to needs and wants?

    • Needs can be met without any production at all, because nature supplies everything that people require for a comfortable and secure life.
    • Wants are only met by governments through public spending, so private firms have no real role in meeting them.
    • Resources are used to meet unlimited wants, and goods and services are the means of meeting them.
    • Needs and wants are the same as profits, so firms produce only what generates the highest return for their owners and investors each year.

  7. Which of the following best distinguishes a need from a want?

    • A need is a product sold in shops and a want is a service sold online, which is a simple way to classify goods.
    • A need is always expensive and a want is always cheap, so the price a product carries is the main way to tell the two apart in practice.
    • A need is essential for survival or wellbeing, whereas a want is a desire that can go unmet.
    • A need is supplied by government and a want by the private sector, so the supplier shows whether a good is essential.

  8. Which key economic decision is most directly affected by a government decision to subsidise renewable energy producers?

    • What to produce.
    • Whether the economy is growing, because a subsidy always increases the rate of growth of the economy in the year that it is introduced.
    • How to produce, because the subsidy changes the choice of production methods, such as capital- or labour-intensive techniques.
    • Who is to benefit, because the subsidy transfers money from taxpayers to energy producers, changing who gains from output.

  9. An economy produces more luxury goods and fewer basic goods. Which key decision has changed, and what is the implication?

    • How to produce: firms now use more labour and less capital, so the factor mix has moved towards labour-intensive methods.
    • Whether to produce: production has stopped for many firms, and the economy has moved to a state where no goods are made at all.
    • Who is to benefit: all consumers are now equal in the amount of goods they receive, so output is shared completely evenly.
    • What to produce: resources now go towards different goods.

  10. Which of the following is the most accurate description of the 'how to produce' decision?

    • Choosing the price at which goods are sold to consumers in the market, based on the costs and the expected demand for each product.
    • Choosing which consumers receive goods first when supplies are limited, so that the queue for each product is managed in a fair way.
    • Choosing how much money the government spends on public services, such as health, education and transport, in each year's budget.
    • Choosing the combination of factors of production used to make goods.

  11. Which of the following correctly links the three key economic decisions to the purpose of economic activity?

    • They are concerned only with the financial performance of firms, so they measure profit and loss rather than how well needs are met.
    • They determine how scarce resources are used to satisfy needs and wants.
    • They are unrelated to the satisfaction of needs and wants, because the three decisions concern only firms' accounting.
    • They are only relevant to command economies, where central planners make all decisions, and have no bearing on markets.

  12. A government introduces a scheme that allocates free school meals to children from low-income families. Which key economic decision is most directly addressed?

    • Who is to benefit.
    • What to produce, because the school meals scheme increases the output of food products, which changes the goods made each year.
    • Whether the scheme will be funded by borrowing, because the government must decide how to pay for it in its annual budget.
    • How to produce, because the school meals scheme uses a different method of catering, with new equipment and staffing.

  13. Which of the following would be the best example of a 'how to produce' change in a farm?

    • Increasing the price of produce during a drought, which changes the revenue that the farm earns from each unit of output it sells.
    • Adopting automated harvesting machinery in place of seasonal workers.
    • Growing a different crop because of a change in the price that buyers are willing to pay for each product at the local market.
    • Selling produce to a supermarket instead of a local market, which changes the buyer that the farm serves but not the method of production.

  14. A market economy answers the three key decisions mainly through:

    • decisions taken only by trade unions, which negotiate the output of every industry and the distribution of goods for their members.
    • government planning of all output, with ministries deciding what is made, how it is made and to whom it is distributed each year.
    • random allocation by lottery, so that goods, production methods and the beneficiaries are all chosen by chance rather than by any system.
    • the interaction of prices determined by demand and supply.

  15. Which statement best explains why the three key decisions must be made in every economy?

    • Because consumers never change their preferences, so the economy must decide once and for all what is produced and for whom.
    • Because resources are unlimited and so must be allocated among competing uses, which means decisions are only needed in rich countries.
    • Because governments always want to control production and to decide which goods are made, so that the decisions are imposed on citizens.
    • Because resources are scarce, so choices must be made about what to produce, how and for whom.

  16. Which key economic decision is best illustrated by a decision to produce more public transport rather than private cars?

    • How to produce, because the public transport system uses different production methods from those used to make private cars in factories.
    • What to produce.
    • Where to locate production, because a public transport network needs to be placed in different parts of the country than car factories.
    • Who is to benefit, because public transport is cheaper for poorer households and so it changes the distribution of goods and services.

  17. An economist argues that an economy is not meeting its purpose if it produces goods that nobody needs or wants. Which concept is most relevant?

    • Economic activity exists to satisfy needs and wants.
    • Opportunity cost of unused resources, because resources that are idle carry a cost in terms of the output that could have been produced.
    • Comparative advantage, because countries should produce the goods in which they have the lowest opportunity cost, whatever their demand.
    • Inflation targeting, because the central bank must keep the price level stable whatever goods are produced by firms in the economy.

  18. Which of the following best describes how the who-benefits decision can change over time in an economy?

    • It changes as tax and transfer policies alter the distribution of goods and income.
    • It changes only when the exchange rate changes.
    • It changes only when firms enter or leave the industry.
    • It never changes because incomes are fixed.

  19. A country produces a large output of armaments but very little healthcare. Which key decision is the clearest focus of this criticism?

    • Whether to trade, because the criticism is that the country exports armaments but imports the healthcare that it needs for its population.
    • Who is to benefit, because the criticism is that the armaments are for the state while the healthcare is denied to the ordinary population.
    • How to produce, because the criticism concerns the methods used to make armaments and healthcare, such as labour skills.
    • What to produce.

  20. A firm decides to stop producing paper cups and start producing reusable steel bottles. Which key economic decision has changed?

    • What to produce.
    • Who is to benefit, because the steel bottles are sold to a different group of consumers, who now receive the output of the firm each year.
    • How much labour to hire in every case, because the new product requires more workers in every stage of production than the old product did.
    • How to produce, because the firm now uses steel rather than paper, which changes the materials and processes used.

All AQA Economics quizzes