Chapter 08 The Factors Of Production
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8 The factors of production
Chapter Eight
The factors of production
Self-assessment Questions 8.1(a)
The supply of labour would increase. The immigrants will provide a fresh pool of labour.
8.1(b)
The supply of labour would decrease, as the F.4 and F.5 students now could not enter the labour force.
8.1(c)
The supply of labour would decrease.
8.2
Wage income in the form of commissions only tends to be very irregular. The risk of income fluctuation is very high.
8.3
Yes! They are man-made and can be used in production.
8.4
Yes! As owners, the shareholders need to bear the risk that their investment may not be successful.
8.5
If doctors change their occupations, they have to give up the return from being doctors. Thus, the opportunity cost for them to change occupations is rather high.
Multiple Choice Questions 1 6
A C
2 7
B C
3
C
4
C
5
A
1
Of the four occupations, the average income of factory workers tends to be the lowest. This means that their opportunity cost of changing occupations is the lowest, and hence they tend to be more occupationally mobile.
4
An entrepreneur is the owner of a business. Hawkers usually own their business and are therefore entrepreneurs.
Short Questions 8(a)
Factors of production refer to all the inputs in producing output.
8(b)
Land: site of the shop Labour: waiters, cooks Capital: tables, food, electricity and utensils Entrepreneurship: owner
9
Both can be correct. Dr Chan owns and manages the clinic, so he can be regarded as the entrepreneur of the clinic. On the other hand, he also treats patients and is therefore also classified as labour.
New Introductory Economics 3rd Edition Suggested Solutions
21
© Pearson Education Asia Limited 2003
8 The factors of production
Structured Essay Question 10(a) 10(b)(i)
He is constrained by the limited resources possessed. Factory workers: piece rate Clerk: time rate
10(b)(ii) Profits. The two differences are: profits can be negative, i.e. he may suffer a loss; and profits can only be determined after sales have been made. 10(b)(iii) For the factory workers, if they are paid on a time rate, they may tend to be lazy. As their work is mostly standardised and can be easily measured, they are usually paid on a piece rate. On the contrary, as the clerk’s work is not standardised, it is very costly to determine the rate and measure his output; therefore it is better to use a time rate instead of a piece rate to pay him.
New Introductory Economics 3rd Edition Suggested Solutions
22
© Pearson Education Asia Limited 2003
Chapter Eight
The factors of production
Self-assessment Questions 8.1(a)
The supply of labour would increase. The immigrants will provide a fresh pool of labour.
8.1(b)
The supply of labour would decrease, as the F.4 and F.5 students now could not enter the labour force.
8.1(c)
The supply of labour would decrease.
8.2
Wage income in the form of commissions only tends to be very irregular. The risk of income fluctuation is very high.
8.3
Yes! They are man-made and can be used in production.
8.4
Yes! As owners, the shareholders need to bear the risk that their investment may not be successful.
8.5
If doctors change their occupations, they have to give up the return from being doctors. Thus, the opportunity cost for them to change occupations is rather high.
Multiple Choice Questions 1 6
A C
2 7
B C
3
C
4
C
5
A
1
Of the four occupations, the average income of factory workers tends to be the lowest. This means that their opportunity cost of changing occupations is the lowest, and hence they tend to be more occupationally mobile.
4
An entrepreneur is the owner of a business. Hawkers usually own their business and are therefore entrepreneurs.
Short Questions 8(a)
Factors of production refer to all the inputs in producing output.
8(b)
Land: site of the shop Labour: waiters, cooks Capital: tables, food, electricity and utensils Entrepreneurship: owner
9
Both can be correct. Dr Chan owns and manages the clinic, so he can be regarded as the entrepreneur of the clinic. On the other hand, he also treats patients and is therefore also classified as labour.
New Introductory Economics 3rd Edition Suggested Solutions
21
© Pearson Education Asia Limited 2003
8 The factors of production
Structured Essay Question 10(a) 10(b)(i)
He is constrained by the limited resources possessed. Factory workers: piece rate Clerk: time rate
10(b)(ii) Profits. The two differences are: profits can be negative, i.e. he may suffer a loss; and profits can only be determined after sales have been made. 10(b)(iii) For the factory workers, if they are paid on a time rate, they may tend to be lazy. As their work is mostly standardised and can be easily measured, they are usually paid on a piece rate. On the contrary, as the clerk’s work is not standardised, it is very costly to determine the rate and measure his output; therefore it is better to use a time rate instead of a piece rate to pay him.
New Introductory Economics 3rd Edition Suggested Solutions
22
© Pearson Education Asia Limited 2003
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