Economics MCQs

Ch 1, 2, 3, 4
Compiled by: Ms Misbah Shahzadi
1. What is the best example of the existence of the economic problem?
A. A government provides accommodation for all those who are homeless.
B. A police force has a lengthening list of unsolved crimes.
C. Janitha hands her homework in at the last permitted deadline.
D. Musa completes his journey without putting petrol in his car.
2. The diagram shows an initial production possibility curve of PPC1

What may cause the movement of the production possibility curve from PPC1 to PPC2?
A. a better educated workforce
B. a decrease in availability of raw materials
C. increased wages
D. lower productivity
3. An increase in the number of manufacturing robots in the car manufacturing industry
represents an increase in the quantity of which factor of production?
A. capital
B. enterprise
C. labour
D. land
4. The diagram shows the choices for an individual between leisure and earnings

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 What is the opportunity cost to the individual of the extra earnings when moving from position X to
position Y?

A. $10
B. $40
C. 3 hours of leisure per day
D. 9 hours of leisure per day
5. What economic concept must be at work when there is movement by a country along its
production possibility curve?
A. economies of scale
B. equilibrium price
C. maximum profit
D. opportunity cost
6. Which statement about a production possibility curve is correct?
A. A production possibility curve is an alternative name for an industry supply curve.
B. A production possibility curve is an economic model of potential output.
C. A realistic production possibility curve must be drawn as a straight line.
D. A production possibility curve applies only to an economy’s production of goods.
7. Which firm is likely to find it most difficult to expand the use of its main factor of production?
A. a farm growing crops in extensive fields
B. a technology firm dependent on risky innovations
C. a textile firm making use of labour-intensive systems
D. an engineering firm relying upon capital-intensive methods
8. Each factor of production earns an income.
What correctly identifies the income for labour and capital?

9. What could be the opportunity cost of a nuclear power station?

A. the running costs of the power station
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 B. a coal-fired power station
C. the current value of the power station
D. the cost of building the power station
10. The diagram shows a production possibility curve for maize and cotton

Bad weather causes a poor harvest for both crops.

Which movement could be used to represent this change?
A. P to R
B. Q to R
C. S to Q
D. S to R
11. What is not a factor of production?
A. a $20 banknote
B. an office
C. a photocopier
D. a secretary
12. In 2014 private companies began to drill in areas of the country to exploit natural gas supplies that
were known to exist.

How might this decision be represented on the diagram which shows a production possibility curve
for the country?
A. by a movement from R to S
B. by a movement from R to V
C. by a movement from S to T
D. by a movement from U to V
13. An economy with few resources is encouraged to improve the quality of its human resources.
Which policy will lead to such an improvement?
A. conserving and protecting more of its natural resources
B. limiting the immigration of skilled labour
C. providing more opportunities for education and training
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 D. reducing the use of machines in production
14. The diagram shows a country’s production possibility curve for rice and wheat

A major flood destroys a large area of agricultural land.

Which movement could represent the resulting change in output?
A. P to Q B. Q to R C. R to S D. S to P
15. A country raises the school leaving age from 15 to 17 years.
What is the opportunity cost of this increased period of school education to the young people
affected?
A. costs of training and employing more teachers
B. financial help necessary for school leavers who go to university
C. government expenditure on building extra classrooms
D. lost income from paid employment because of school attendance
16. Which statement about factors of production is correct?
A. Capital is the money people keep in the bank.
B. Enterprise is found more in service industries than in manufacturing industries.
C. Labour includes only those who work using their hands.
D. Land includes resources found in or under the sea.
17. China earns enough income to purchase large quantities of natural resources from developing
countries.
Which statement explains this situation?
A. China does not experience the economic problem of scarcity.
B. Supplies of natural resources in China are limited relative to demand.
C. There are unlimited supplies of natural resources in developing countries.
D. There is an excess stock of land in China.
18. The diagram shows the change in an economy’s production possibility curve from year 1 to year 2

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 What might explain the change from year 1 to year 2?
A. Resources have moved from the production of services to the production of goods.
B. The number of workers unemployed in manufacturing has fallen.
C. The producers of services have introduced better technology.
D. The workers in the production of goods have become less efficient
19. A security company wishes to recruit an experienced person for a senior position to answer
customers’ emergency calls, some of which would be during the night. It is offering a good salary
and a small apartment next to the company premises.
Which person would be most likely to apply and be offered the position?
A. a confident person currently employed in installing security systems for the company
B. a person who has experience of answering customers’ queries in a travel company
C. a recently qualified engineering graduate in security systems
D. a reliable person who says that he needs to live with his young family of five children
20. Why do female workers in many countries have a lower income than male workers?
A. Female workers are more experienced.
B. Female workers are more likely to be employed part-time.
C. Female workers are more likely to be in trade unions.
D. Female workers have more qualifications.
21. The following are four ways factors of production are used.
What is likely to require the greatest use of the factor enterprise?
A. a carpenter making wooden articles in his leisure time for sale at a monthly market
B. a corn farmer negotiating with other farmers to hire expensive machinery
C. a food shop owner sometimes selling flowers in the shop
D. a householder harvesting vegetables grown at home
22. To help reduce the price of oil, new supplies are needed. However, in 2013, objectors opposed
attempts to explore new sites because of the environmental damage the exploration might cause.
How does this illustrate the basic economic problem?
A. Oil is a limited resource.
B. Oil is expensive.
C. The exploration involves demand and supply.
D. There are external costs involved in production.
23. With a given level of resources, an economy that can produce food or computers is at point Q on its
production possibility curve. Population growth means more resources need to be allocated to
food production.
At which point in the short term will the economy be in the diagram?

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 24. A person makes sandwiches at home for five hours each day. She makes 20 sandwiches per hour,
and she sells each sandwich for $2 each.
What is the opportunity cost if she takes a holiday on a working day?
A. $2
B. $40
C. 20 sandwiches
D. 100 sandwiches
25. What is the basic economic problem?
A. finite resources and limited wants
B. finite resources and unlimited wants
C. infinite resources and limited wants
D. infinite resources and unlimited wants
26. New oil reserves are discovered.
What has increased in supply?
A. Capital B. enterprise C. labour D. land
27. The diagram shows production possibility curves (PPC) for a country that can produce agricultural
products or manufactured products.
Its current PPC passes through points Q and S but the country is currently experiencing
unemployment.

If there is now full employment at the same time as new agricultural techniques enable an increase
in productivity, what would be the movement on the PPC diagram?
A. P to R
B. P to S
C. Q to R
D. S to Q
28. Each of the factors of production earns an income.
What are the incomes for capital and enterprise?

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29. What could discourage women from seeking employment?

A. More education and training are provided.
B. More flexible and part-time jobs are available.
C. There are fewer promotion opportunities for women.
D. There is a shift in employment to the services sector.
30. A farmer reduces the land used to grow wheat from 80 hectares to 60 hectares and increases the
use of the land for growing potatoes from 80 to 100 hectares.
What is the opportunity cost of this change?
A. The output from 20 hectares used for growing potatoes.
B. The output from 20 hectares used for growing wheat.
C. The output from 60 hectares used for growing wheat.
D. The output from 80 hectares used for growing potatoes
31. All countries need to produce food. Which type of agriculture would make the best use of the
resources of developing and developed economies?

32. What would an economist regard as an example of the factor of production capital?
A. an individual’s purchase of stocks and shares
B. borrowing by a firm to pay for electricity
C. the building by a firm of a new factory
D. total savings by individuals in a country
33. The diagram shows a production possibility curve (PPC).

Why is the curve usually drawn like this?

A. International free trade exists.
B. Opportunity cost changes.
C. Resources are unlimited in supply.
D. Some resources will be unemployed.
34. In recent years more golf courses, which use large quantities of water, have opened in China.
What may be the opportunity cost of this?
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 A. cost of water
B. loss of farmland
C. sales of golf equipment
D. wages of golf course staff
35. A government wishes to increase agricultural output. It gives farmers the tools to irrigate the
farmers’ fields. Which factors of production are provided by the farmers?
A. capital and enterprise
B. enterprise and labour
C. labour and land
D. land and capital
36. The diagram shows a production possibility curve (PPC) for an economy that produces both capital
goods and consumer goods.
At which point will the economy show the highest potential for sustained long run economic
growth?

Answer

37. In recent years more golf courses, which use large quantities of water, have opened in China.
What may be the opportunity cost of this?
A. cost of water
B. loss of farmland
C. sales of golf equipment
D. wages of golf course staff
38. Which example of a factor of production in the fishing industry is correct?

39. Economics textbooks often start by identifying the existence of the basic economic problem.
What is it that makes this problem ‘basic’?
A. It affects all economies and individuals.
B. It is the most urgent target of government economic policy.
C. It only affects low-income developing economies.
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 D. It relates to the production of raw materials in the primary sector.

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