IG MCQ PRACTICE 2

Which of the following is not considered a factor of production?

• a farm

• a farmer

• a farmer's bank account

• a second-hand tractor

Answer explanation

A farmer's bank account is not considered a factor of production as it is not a physical or tangible input used in the production process.

What may be considered an opportunity cost of repairing flood damage in a country?

• reallocating government funds from other projects

• providing shelter for the homeless

• a decline in the tourist industry

• loss of profits from affected businesses

Answer explanation

The opportunity cost of repairing flood damage in a country is reallocating government funds from other projects, as resources are diverted from alternative uses.

In the context of a recession that decreases production in both cars and furniture, which movement on the diagram represents this change?

• X to W

• X to Y

• Z to W

• Z to Y

Answer explanation

The correct movement on the diagram that represents a recession decreasing production in both cars and furniture is from X to Y.

In response to a price increase from $5 per kilo to $6 per kilo, a chicken farmer raises supply from 400 kilos to 500 kilos per week. What is the price elasticity of supply?

• 0.8

• 0.9

• 1.2

• 1.25

Answer explanation

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, it is (500-400)/400 / (6-5)/5 = 1.25

What could cause the movement from point X to point Y on the demand curve for chocolate in the diagram provided?

• A change in tastes

• A fall in the price of chocolate

• An increase in income

• A successful advertising campaign for chocolate

Answer explanation

A fall in the price of chocolate would cause the movement from point X to point Y on the demand curve as lower prices typically lead to an increase in quantity demanded.

If both a bee-keeper's bees pollinate neighbors' fruit trees and sting gardeners, how will costs and benefits be affected?

• External benefits will fall and social costs will fall.

• External costs will rise and social benefits will fall.

• Social costs and social benefits will fall.

• Social costs and social benefits will rise.

Answer explanation

Social costs and social benefits will rise due to the bees pollinating neighbors' fruit trees and stinging gardeners, leading to increased overall impact.

Which of the following would not have been a cause of the significant fall in the world price of petrol (gasoline) in 2015?

• The continuing global recovery from the world economic recession

• The increasing exploitation of US oil reserves

• The re-entry of Iranian producers to the world oil market

• The shorter journeys from using the new Suez Canal

Answer explanation

The continuing global recovery from the world economic recession would not have been a cause of the significant fall in the world price of petrol in 2015.

Which statement about financial matters is correct?

• Commercial banks’ main activity is the finance of international trade.

• Paper banknotes possess all the desirable properties needed to act as money.

• Stock exchanges trade mainly in second-hand stocks and shares.

• The central bank acts as the lender of last resort to companies facing bankruptcy.

Answer explanation

The correct statement is that stock exchanges trade mainly in second-hand stocks and shares.

What is most likely to be used to support a claim for wage increases in an industry?

• a decrease in the industry's sales

• a decrease in the need for specialist training

• an increase in cheap imports of a rival product

• an increase in wages in a similar industry

Answer explanation

To support a claim for wage increases in an industry, an increase in wages in a similar industry is most likely used as a benchmark for justifying the need for higher wages.

The government increases the rate of income tax and decreases the rate of a sales tax (VAT). From the initial equilibrium point of X, which letter indicates the new equilibrium point in a market for normal goods?

• A

• B

• C

• D

Answer explanation

The correct choice is D because an increase in income tax reduces disposable income, shifting the demand curve left, leading to a new equilibrium point at a lower quantity and price.