4.1.1.3 Economic resources Quiz: AQA Economics, Unit 1

The 20 questions

1. Which of the following is one of the four factors of production?

   • Labour.
   • Money.
   • Inflation.
   • Demand.

2. Which factor of production is best described as the human effort used in producing goods and services?

   • Enterprise.
   • Labour.
   • Land.
   • Capital.

3. Capital as a factor of production refers to:

   • money held in a bank account by consumers, which can be spent or saved at the discretion of each household in the economy.
   • the skills of managers in organising production, including their judgement about which products to make and how to sell them.
   • the natural resources found on or under land, such as minerals, timber and fish stocks that are extracted for use in production.
   • man-made goods, such as machinery and equipment, used to produce other goods.

4. Enterprise, as a factor of production, is best described as:

   • the physical land on which a firm operates, including its factory sites, offices and warehouses that are used for making goods.
   • the number of hours workers are employed in a firm each week, measured across all of its employees in every department.
   • the willingness to take risks and organise the other factors to produce output.
   • the amount of money a firm borrows from banks each year to finance its investment in new buildings and equipment for production.

5. Which of the following is the best example of land as a factor of production?

   • A farmer's expertise in crop rotation.
   • Bank loans used to buy seeds.
   • Farmland, minerals and fisheries.
   • A tractor used on a farm.

6. A bakery buys a new oven. Which factor of production does the oven represent?

   • Enterprise.
   • Capital.
   • Labour.
   • Land.

7. Why is the environment described as a scarce resource?

   • Because governments always own all natural resources and so decide centrally how much of the environment can be used by private firms.
   • Because the environment has no market price at all, so it cannot be scarce in the economic sense that is studied by economists.
   • Because clean air, water and land are limited and have alternative uses.
   • Because it is always abundant and cannot be damaged by human activity, so there is never any limit on clean air or water.

8. A firm's manager decides to launch a new product, risking losses if it fails. Which factor is most directly being exercised?

   • Enterprise.
   • Capital, because machinery and equipment are needed to make the new product in the firm's factory.
   • Labour, because the workforce carries out the launch and the day-to-day work of getting the product to customers.
   • Land, because the firm uses natural resources and property to launch the product in its chosen market.

9. Which of the following is an example of a factor payment?

   • A donation paid by a firm to a charity.
   • A tax paid by a household to the government.
   • A fine paid by a firm to a regulator.
   • Rent paid to the owner of farmland.

10. Which of the following correctly pairs a factor of production with its reward?

    • Capital: wages, which is the reward that machines and buildings receive for their use in producing goods and services.
    • Labour: interest, which is the return that workers receive for lending their skills and time to firms over a period of years.
    • Land: wages, which is the reward that landowners receive for their effort in managing and maintaining the property they own.
    • Enterprise: profit.

11. A coal mine is closed because the coal reserves are exhausted. Which factor of production has become scarcer for this mine?

    • Labour, in the form of miners who work underground and whose skills are used to extract coal from the mine each year.
    • Land, in the form of natural resources.
    • Money, in the form of bank deposits that the mine holds and uses to pay wages, rent and other running costs over time.
    • Enterprise, in the form of managers who organise the mine and take the risks of operating it in a changing coal market.

12. Which of the following best explains why factors of production are described as scarce?

    • They are only available to governments, which decide how each factor is distributed among the private firms in the economy.
    • They are available in unlimited quantities, so every firm can obtain as much of each factor as it wants at the going price.
    • They can be created at no cost by firms, which means that the supply of factors grows automatically whenever demand increases.
    • They have alternative uses and their supply is limited.

13. A firm employs 40 workers and uses 10 machines. Which statement correctly classifies these inputs?

    • Workers are enterprise and machines are land.
    • Workers are land and machines are labour.
    • Workers are capital and machines are enterprise.
    • Workers are labour and machines are capital.

14. Which of the following would be classed as enterprise rather than labour?

    • A factory worker assembling components on a production line, following the instructions of the supervisor at each stage.
    • A driver delivering goods to customers in a van, whose job is to carry out the route set out by the transport manager.
    • A cashier scanning items at a supermarket checkout, whose work is repetitive and follows the procedures set by the store.
    • A founder who sets up a company and bears the risk of its failure.

15. Which of the following is a key reason why environmental resources such as clean air are treated as an economic resource?

    • Because they are free to use without limit, so no firm or household ever needs to consider the cost of using them in production.
    • Because they can only be owned by governments, which control access to all clean air and water through a central licensing system.
    • Because they are limited in supply and their use involves opportunity cost.
    • Because they never appear in any market, so their value can never be measured by economists in monetary terms.

16. Why might the reward to land be unusually high in a city centre compared with rural areas?

    • Because the government fixes city rents at a higher level than rural rents, regardless of the demand for property in either location.
    • Because land in the city is scarcer relative to demand from businesses and households.
    • Because city land has no alternative uses, so it can only be used for one purpose and must command a high price for that use.
    • Because city land is more fertile than rural land, so crops and other products can be grown there at a much higher yield per hectare.

17. A firm invests £2 million in automated robots. Which of the following is the most accurate description of this investment?

    • It is an increase in the capital stock of the firm.
    • It is a payment of rent to landowners, because the firm pays for the use of the factory space where the robots are installed.
    • It is an increase in enterprise, because the purchase shows the firm's willingness to organise its production in new ways.
    • It is an increase in labour supply, because the robots add to the number of workers available for production in the firm.

18. Which of the following best explains why the reward to labour is called a wage?

    • It is the interest paid on borrowed money.
    • It is the payment made to landowners for the use of their property.
    • It is the payment made to workers for their labour services.
    • It is the return earned by owning a business.

19. Which factor of production would most likely increase in quantity following a sustained rise in the reward to enterprise?

    • Enterprise, because more people are attracted to starting businesses.
    • Labour, because all workers become entrepreneurs once the reward to enterprise is high enough to tempt them into starting firms.
    • Land, because rent falls when the reward to enterprise rises and more land is therefore made available for farming and building.
    • Capital, because interest rates always fall when the reward to enterprise rises, which encourages firms to borrow and invest more.

20. A country discovers a large oil field beneath its farmland. Which statement best evaluates the effect on the factor of production land?

    • The supply of land falls because oil extraction uses up the farmland entirely, so it can never again be used for crops.
    • The supply of capital increases because oil is a man-made good made by drilling rigs, so the discovery adds to capital.
    • The supply of natural resources available for use increases, though farming may lose land and its alternative use involves trade-offs.
    • The supply of land is unchanged because oil is not a factor of production, so the discovery has no effect on land.

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