Test 2 Revision

What is the basic economic problem faced by all societies?

• Rising unemployment

• Unlimited wants and limited resources

• Inflation and deflation

• Equal distribution of wealth

Which of the following is not one of the four factors of production?

• Land

• Labour

• Profit

• Capital

Which factor of production involves combining resources and taking risks?

• Land

• Enterprise

• Labour

• Capital

Opportunity cost refers to:

• The financial cost of a decision

• The value of the next best alternative forgone

• The profit gained from investment

• The total value of resources used

In a command economy, who makes the key economic decisions?

• Consumers

• Businesses

• Government

• Foreign investors

Which of the following best describes a market economy?

• Government owns all resources

• Buyers and sellers determine prices

• Trade is restricted to domestic markets only

• Charities set prices for goods and services

The law of demand states that:

• When price rises, demand rises

• When price falls, demand falls

• When price rises, demand falls

• Demand is unaffected by price

What usually happens to equilibrium price when supply increases but demand stays the same?

• It rises

• It falls

• It stays the same

• It disappears

Which of the following would shift the demand curve for coffee to the right?

• A fall in consumer incomes

• An increase in the price of tea (a substitute)

• A fall in population

• Higher interest rates

Which of the following would cause the supply curve of wheat to shift left?

• Better farming technology

• A drought

• Lower input costs

• A subsidy for farmers