BUSN100 Lesson 4 Quiz Economics
and Business Decision Making
Questions And Correct Answers
(Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf
1. Which statement best describes economics?
A. The study of how businesses advertise products
B. The study of how governments collect taxes
C. The study of how people and organizations allocate scarce
resources
D. The study of how companies prepare financial statements
Answer: C. The study of how people and organizations allocate scarce
resources
Rationale: Economics examines how individuals, businesses,
governments, and other organizations make choices about allocating
limited resources to satisfy competing wants and needs. Scarcity makes
economic decision making necessary because resources are not
unlimited.
2. What is the fundamental economic problem faced by individuals
and businesses?
A. Scarcity of resources relative to unlimited wants
B. Excessive availability of consumer goods
C. Lack of competition among businesses
D. Government ownership of all resources
,Answer: A. Scarcity of resources relative to unlimited wants
Rationale: Scarcity exists because available resources are limited while
human wants and needs are extensive. Individuals and businesses
must therefore make choices about how resources should be used.
3. Which of the following is considered a factor of production?
A. Advertising
B. Labor
C. Inflation
D. Consumer confidence
Answer: B. Labor
Rationale: Labor is one of the major factors of production. The
traditional factors include land, labor, capital, and entrepreneurship.
Labor represents the physical and mental effort people contribute to
producing goods and services.
4. What does opportunity cost represent?
A. The amount of money spent on production
B. The total cost of a business operation
C. The accounting value of an asset
D. The value of the next-best alternative given up when a choice is
made
Answer: D. The value of the next-best alternative given up when a
choice is made
Rationale: Every choice involves alternatives. Opportunity cost
measures what is sacrificed when one alternative is selected over the
next-best available alternative. Understanding opportunity cost helps
businesses evaluate competing uses of resources.
, 5. A business has enough funds to pursue only one of two projects.
Choosing Project A means giving up Project B. What economic
concept is illustrated?
A. Opportunity cost
B. Price discrimination
C. Economies of scale
D. Monetary policy
Answer: A. Opportunity cost
Rationale: The forgone Project B represents the opportunity cost of
selecting Project A. Managers frequently use this concept when
deciding how to allocate limited financial, human, and physical
resources.
6. Which economic system relies heavily on private ownership and
market forces?
A. Command economy
B. Traditional economy
C. Market economy
D. Subsistence economy
Answer: C. Market economy
Rationale: A market economy relies primarily on private ownership,
voluntary exchange, competition, and supply and demand to determine
what goods and services are produced and at what prices.
7. In a command economy, major economic decisions are primarily
made by:
A. Individual consumers
B. A central authority or government
, C. Private investors
D. International corporations
Answer: B. A central authority or government
Rationale: In a command economy, government authorities make
important decisions regarding production, resource allocation, prices,
and distribution. This differs from a market economy, where
decentralized decisions play a larger role.
8. What is a mixed economy?
A. An economy with no government involvement
B. An economy based entirely on barter
C. An economy controlled entirely by corporations
D. An economy combining market forces with government
involvement
Answer: D. An economy combining market forces with government
involvement
Rationale: Most modern economies are mixed economies. Private
individuals and businesses make many economic decisions, while
governments regulate markets, provide public services, establish laws,
and sometimes intervene to address economic problems.
9. Which factor of production refers to natural resources?
A. Land
B. Labor
C. Capital
D. Entrepreneurship
Answer: A. Land
and Business Decision Making
Questions And Correct Answers
(Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf
1. Which statement best describes economics?
A. The study of how businesses advertise products
B. The study of how governments collect taxes
C. The study of how people and organizations allocate scarce
resources
D. The study of how companies prepare financial statements
Answer: C. The study of how people and organizations allocate scarce
resources
Rationale: Economics examines how individuals, businesses,
governments, and other organizations make choices about allocating
limited resources to satisfy competing wants and needs. Scarcity makes
economic decision making necessary because resources are not
unlimited.
2. What is the fundamental economic problem faced by individuals
and businesses?
A. Scarcity of resources relative to unlimited wants
B. Excessive availability of consumer goods
C. Lack of competition among businesses
D. Government ownership of all resources
,Answer: A. Scarcity of resources relative to unlimited wants
Rationale: Scarcity exists because available resources are limited while
human wants and needs are extensive. Individuals and businesses
must therefore make choices about how resources should be used.
3. Which of the following is considered a factor of production?
A. Advertising
B. Labor
C. Inflation
D. Consumer confidence
Answer: B. Labor
Rationale: Labor is one of the major factors of production. The
traditional factors include land, labor, capital, and entrepreneurship.
Labor represents the physical and mental effort people contribute to
producing goods and services.
4. What does opportunity cost represent?
A. The amount of money spent on production
B. The total cost of a business operation
C. The accounting value of an asset
D. The value of the next-best alternative given up when a choice is
made
Answer: D. The value of the next-best alternative given up when a
choice is made
Rationale: Every choice involves alternatives. Opportunity cost
measures what is sacrificed when one alternative is selected over the
next-best available alternative. Understanding opportunity cost helps
businesses evaluate competing uses of resources.
, 5. A business has enough funds to pursue only one of two projects.
Choosing Project A means giving up Project B. What economic
concept is illustrated?
A. Opportunity cost
B. Price discrimination
C. Economies of scale
D. Monetary policy
Answer: A. Opportunity cost
Rationale: The forgone Project B represents the opportunity cost of
selecting Project A. Managers frequently use this concept when
deciding how to allocate limited financial, human, and physical
resources.
6. Which economic system relies heavily on private ownership and
market forces?
A. Command economy
B. Traditional economy
C. Market economy
D. Subsistence economy
Answer: C. Market economy
Rationale: A market economy relies primarily on private ownership,
voluntary exchange, competition, and supply and demand to determine
what goods and services are produced and at what prices.
7. In a command economy, major economic decisions are primarily
made by:
A. Individual consumers
B. A central authority or government
, C. Private investors
D. International corporations
Answer: B. A central authority or government
Rationale: In a command economy, government authorities make
important decisions regarding production, resource allocation, prices,
and distribution. This differs from a market economy, where
decentralized decisions play a larger role.
8. What is a mixed economy?
A. An economy with no government involvement
B. An economy based entirely on barter
C. An economy controlled entirely by corporations
D. An economy combining market forces with government
involvement
Answer: D. An economy combining market forces with government
involvement
Rationale: Most modern economies are mixed economies. Private
individuals and businesses make many economic decisions, while
governments regulate markets, provide public services, establish laws,
and sometimes intervene to address economic problems.
9. Which factor of production refers to natural resources?
A. Land
B. Labor
C. Capital
D. Entrepreneurship
Answer: A. Land
