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Test 1 (Objectives Questions)

1. An unemployed worker accepts a job.


Which of the following is the opportunity cost of this decision?
A the cost of travel to work
B the income from the new job
C the leisure time lost
D the training in the new job
2. A hospital cannot treat all the people that need treatment. This is an example of
A excess supply.
B limited wants.
C scarcity.
D unlimited resources.
3. Economic growth in Russia and China used to be led by the public sector. Now it results more
from activities in the private sector. However, both sectors are important.
Which term describes the current system in Russia and China?
A market
B mixed
C planned
D subsistence
4. Which action is evidence that a country is a planned economy?
A A central bank plans an interest rate change.
B A government plans the allocation of all resources.
C A local authority plans a new library.
D A ministry of finance plans the annual budget.
5. Which statement best explains why drought is an economic problem?
A Drought cannot be controlled.
B Rainfall is unreliable.
C The effects of drought involve the government.
D Water is a scarce good.
6. What is not an example of a factor of production in a hairdressing business?
A a haircut
B a hairdresser
C a hairdressing shop
D a hair-drier
7. In a market economy, what does the entrepreneur decide?
A the combination of resources used
B the demand for the product
C the equilibrium price of the product
D the level of profits

8. China is changing from a centrally planned economy towards a market economy.


How will the influence of consumers and the government change?
consumers government
A
decrease
decrease
B
decrease
increase
C
increase
decrease
D
increase
increase
9. A farmer pays a landowner for the use of a field.
What is the income to the landowner called?
A interest
B profit
C rent
D wages
10. Construction companies are building new houses on land previously used for farming.
What is the opportunity cost to society of this activity?
A improved living conditions
B less congestion in city centers
C more homes for new homeowners
D some farm output
11. What is most likely to cause queues of consumers to appear regularly outside shops in a
planned
economy?
A the failure of money to act as a unit of account
B the inefficient operation of the market system
C the misallocation of resources by the government
D the rising opportunity cost of shopping
12. What is regarded as a factor of production?
A capital
B interest
C profit
D rent
13. What is an example of the factor of production capital?
A a truck
B a truck driver
C a truck drivers savings
D a truck drivers wage

14. In a market economy, who determines the allocation of resources?


A central authorities only
B firms only
C consumers and firms only
D central authorities and firms only
15. A government is faced with the choice of raising taxation or cutting public spending.
Of what is this an example?
A conservation of resources
B monetary policy
C opportunity cost
D substitution of factors
16. Each country of Southern Africa has a mixed economy.
Which statement about a mixed economy is correct?
A The government employs most primary sector workers.
B The government owns all major secondary sector industries.
C The government owns the transport network.
D The government provides public and merit goods.
17. What can happen in a planned economy that does not happen in a market economy?
A The allocation of resources can take account of the total effects on society.
B There can be full employment of factors of production.
C There can be inflation.
D There can be international trade.
18. Which of the following is a factor of production?
A the payment of interest on a bank loan
B the profit declared by a company in its annual report
C the skill of the managers of a business
D the taxes paid to the government
19. In a mixed economy, resources are used as a result of
A the decisions of consumers only.
B the decisions of firms only.
C the decisions of consumers and firms.
D the decisions of consumers, firms and government.
20. A farmer decides to use a more fertile field. As a result he is able to produce the same output
as before but with fewer workers and less equipment.
This is a substitution in which
A capital replaces labour and land.
B labour replaces capital and land.
C land replaces capital and enterprise.
D land replaces capital and labour.