1. What is the primary purpose of business activity?

A. To create employment
B. To provide goods and services that satisfy needs and wants
C. To increase government revenue
D. To reduce competition

2. Which of the following is NOT a factor of production?

A. Enterprise
B. Land
C. Labour
D. Demand

3. What does the factor of production ‘land’ include?

A. All natural resources used in production
B. All financial resources owned by firms
C. The efforts of workers
D. Knowledge and risk-taking ability

4. Which factor of production combines the other three and takes risks?

A. Labour
B. Capital
C. Enterprise
D. Land

5. Which of the following is an example of ‘capital’ in production?

A. Office building
B. A delivery truck
C. Machinery in a factory
D. All of the above

6. Why is ‘adding value’ important for a business?

A. It reduces the selling price of products
B. It ensures the selling price is greater than the cost of inputs
C. It guarantees government subsidies
D. It avoids economic problems

7. Which of the following best describes opportunity cost?

A. The additional cost of producing one more unit
B. The sacrifice of the next best alternative when making a decision
C. The total cost of production
D. The selling price minus variable cost

8. Which of these is an example of adding value?

A. Selling raw cotton
B. Selling cotton cloth made from cotton
C. Leaving cotton unprocessed
D. Donating cotton to charity

9. Why do businesses fail?

A. Lack of finance
B. Poor management
C. Failure to adapt to change
D. All of the above

10. Which type of business operates across multiple countries?

A. Local business
B. National business
C. International business
D. Multinational business

11. Which factor of production refers to human effort in production?

A. Land
B. Labour
C. Enterprise
D. Capital

12. Which business is most likely to face cultural challenges in different countries?

A. Local
B. National
C. Multinational
D. Government-owned

13. What is the main difference between national and international businesses?

A. Size of the business
B. Whether they trade only in their home country or beyond borders
C. Type of goods sold
D. Ownership

14. Why is the business environment described as ‘dynamic’?

A. It never changes
B. It changes constantly due to technology, consumer tastes, and competition
C. It is always stable and predictable
D. It depends only on government policies

15. What is the difference between wants and needs?

A. Wants are essential, needs are luxuries
B. Needs are essential, wants are non-essential desires
C. Wants are cheaper, needs are expensive
D. Wants are basic survival, needs are optional

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Business Full Scale Course

16. Which of the following is an economic problem faced by businesses?

A. Unlimited resources
B. Scarcity of resources
C. Too much labour available
D. Government subsidies

17. Which of these is an example of opportunity cost?

A. Choosing to study instead of going to a party
B. Choosing between two identical shirts
C. Deciding whether to sleep or eat at the same time
D. Receiving a scholarship

18. A farmer who grows crops is mainly using which factor of production?

A. Capital
B. Labour
C. Land
D. Enterprise

19. Which is the most likely reason a new business succeeds?

A. Poor financial planning
B. Strong leadership and innovation
C. Lack of customer focus
D. Ignoring competition

20. Why does scarcity exist in economics?

A. Resources are limited while wants are unlimited
B. Governments restrict resources
C. Businesses fail to innovate
D. Consumers save too much money

21. Which of these is an example of labour as a factor of production?

A. A worker in a textile factory
B. A company’s delivery truck
C. A plot of farmland
D. A business owner’s risk-taking

22. A local business can be best described as one which:

A. Operates within one city or town
B. Operates across the whole nation
C. Trades across many countries
D. Is government-owned

23. What is one main advantage of adding value?

A. Business can charge higher prices
B. Products cost less to produce
C. Resources become unlimited
D. Labour costs decrease

24. Why might a multinational business fail in some countries?

A. Adapting successfully to local culture
B. Following local laws strictly
C. Failure to adapt products to local needs
D. Using global advertising strategies

25. Which of these is an example of capital investment?

A. A new machine for production
B. A worker’s effort
C. Fertile soil
D. A manager’s decision-making

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Business Full Scale Course

26. Which of these is an example of enterprise?

A. A factory worker operating machinery
B. A business owner taking a risk and starting a company
C. Land used for farming
D. A bank providing a loan

27. The problem of choice arises because:

A. Wants are limited but resources are unlimited
B. Wants are unlimited but resources are limited
C. Businesses always succeed
D. Governments provide all resources

28. Which of the following is a reason businesses succeed?

A. Strong customer loyalty
B. Poor financial planning
C. Ignoring technological changes
D. Weak leadership

29. Which of these best describes the concept of economic activity?

A. Decisions made without using resources
B. Using scarce resources to produce goods and services
C. The process of avoiding opportunity cost
D. Activities unrelated to production

30. Which is an example of a national business?

A. A shop serving only one local town
B. A clothing chain operating throughout Pakistan
C. A multinational food chain in 50 countries
D. A farmer selling only in his village

31. Which of the following shows a failure to add value?

A. Selling bottled water with branding and packaging
B. Selling raw unprocessed water from a well
C. Selling bread made from flour
D. Selling cars with additional features

32. Why is innovation critical in a dynamic business environment?

A. It guarantees success every time
B. It helps businesses adapt to technological and consumer changes
C. It makes resources unlimited
D. It eliminates competition

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Business Full Scale Course

Answer key and explanations

1. Correct Answer: B
Explanation: Businesses exist to provide goods and services that satisfy needs and wants. A is secondary, C and D are not the main purpose.

2. Correct Answer: D
Explanation: Demand is not a factor of production. The four are land, labour, capital, and enterprise.

3. Correct Answer: A
Explanation: Land refers to all natural resources (soil, water, minerals). Other options relate to capital, labour, or enterprise.

4. Correct Answer: C
Explanation: Enterprise brings together land, labour, and capital, and bears risks.

5. Correct Answer: D
Explanation: Capital includes all man-made resources (machinery, trucks, buildings).

6. Correct Answer: B
Explanation: Adding value means increasing the selling price above costs. Other options are incorrect.

7. Correct Answer: B
Explanation: Opportunity cost is the sacrifice of the next best alternative.

8. Correct Answer: B
Explanation: Processing cotton into cloth adds value. Selling raw cotton does not.

9. Correct Answer: D
Explanation: Businesses fail for multiple reasons including finance, poor management, and lack of adaptability.

10. Correct Answer: D
Explanation: Multinationals operate in multiple countries.

11. Correct Answer: B
Explanation: Labour is human effort. Other factors differ.

12. Correct Answer: C
Explanation: Multinational businesses face cultural challenges in diverse countries.

13. Correct Answer: B
Explanation: National businesses trade only at home, international across borders.

14. Correct Answer: B
Explanation: The business environment is dynamic because it constantly changes.

15. Correct Answer: B
Explanation: Needs are essentials, wants are non-essential desires.

16. Correct Answer: B
Explanation: Scarcity exists because resources are limited.

17. Correct Answer: A
Explanation: Studying means the opportunity cost is the party.

18. Correct Answer: C
Explanation: Farming uses land as the primary factor.

19. Correct Answer: B
Explanation: Innovation and leadership drive success.

20. Correct Answer: A
Explanation: Scarcity exists because resources are limited but wants are unlimited.

21. Correct Answer: A
Explanation: A worker is labour. Truck is capital, land is soil, risk-taking is enterprise.

22. Correct Answer: A
Explanation: Local businesses operate in one area only.

23. Correct Answer: A
Explanation: Adding value allows higher pricing.

24. Correct Answer: C
Explanation: Failure to adapt to local needs can cause failure.

25. Correct Answer: A
Explanation: Capital investment includes machines.

26. Correct Answer: B
Explanation: Enterprise involves risk-taking and innovation.

27. Correct Answer: B
Explanation: Wants are unlimited, resources limited.

28. Correct Answer: A
Explanation: Customer loyalty is a key to success.

29. Correct Answer: B
Explanation: Economic activity uses scarce resources for goods/services.

30. Correct Answer: B
Explanation: A national chain operates throughout a country.

31. Correct Answer: B
Explanation: Raw water lacks added value compared to processed/bottled.

32. Correct Answer: B
Explanation: Innovation helps adapt in a dynamic environment.