Chapter 1: Business activity

1 Which of these is the best definition of the ‘economic problem’?

1) People do not have enough money
2) There are not enough resources to satisfy people’s unlimited wants
3) There are not enough wants for the unlimited resources to satisfy
4) There are too many factors of production

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

1) Oil reserves
2) Factory buildings
3) Skilled labour
4) Music CDs

3 If I buy a book for $10 then the opportunity cost is:

1) everything else I could have bought with the $10
2) $10
3) the benefit lost from not being able to consume the next best option
4) the benefit gained from buying the book

4 Making choices is necessary in all economic systems because:

1) there are so many products that we cannot use them all at once
2) the government has so much money that it does not know what to do with it
3) there are so many resources compared to people’s needs that we have to choose
which ones not to use
4) there are so many wants compared to scarce resources that we have to decide what to
produce

5 Division of labour can be defined as:

1) workers specialise on just one task and become more efficient at it
2) workers become specialist in all jobs
3) all firms only have one worker so jobs are divided between the firms
4) no workers are employed as machines always do all the work

6 One of the drawbacks to specialisation is that:

1) output and efficiency falls
2) workers spend time on training to do several different jobs
3) workers can become bored through only concentrating on one job
4) no machinery is used and this slows down production

7 One of the benefits of specialisation is:

1) output and efficiency increases
2) workers are able to undertake a range of tasks
3) no machinery is used which saves on business costs
4) workers do not have to spend time training to do a particular task

8 The best definition of a business is an organisation that:

1) is owned by the government
2) buys products from other firms and sells them to consumers for a profit
3) produces only those goods and services that satisfy people’s basic needs
4) combines the factors of production to make products that satisfy people’s wants

(continued)

Cambridge IGCSE Business Studies 4th edition © Hodder & Stoughton Ltd 2013 1
9 Which one of the following is the best definition of added value?
1) It is the difference between the prices of different products
2) It is the difference between the total costs of a business and the total value of what it
sells
3) It is the difference between the price of a product and the cost of the bought in
materials needed to make it
4) It is the difference between the price of a product and the value of it

10 If a tailor buys in cloth for $25 and makes a suit that he sells for $65 then he has:
1) made a profit on the suit of $40
2) added $40 of value to the material
3) incurred no opportunity cost in making the suit
4) used his own labour as the only factor of production in making the suit

Cambridge IGCSE Business Studies 4th edition © Hodder & Stoughton Ltd 2013 2