Cambridge IGCSE · Economics (0455)

Firms and production: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Firms and production.

10 questions22 marksFree, no account

Question 1

1 mark

A company produces 5,000 units of output using 20 machines and 50 workers. What is the average product of labour for this firm?

Question 2

1 mark

Which of the following describes a disadvantage often associated with labour-intensive production?

Question 3

1 mark

A firm employs two factors of production: labour and capital. The table shows the total output produced with different combinations of these factors.

\(\begin{array}{|c|c|c|}\hline \text{Capital (Units)} & \text{Labour (Units)} & \text{Total Output (Units)} \\ \hline 5 & 10 & 100 \\ \hline 5 & 20 & 250 \\ \hline 10 & 20 & 600 \\ \hline \end{array}\)

What happens to productivity when the firm increases its inputs from the first row to the third row?

Question 4

1 mark

A clothing manufacturer uses a high ratio of machinery to workers to produce mass-market garments. How would this method of production be classified?

Question 5

1 mark

In a small bakery, 4 workers produce 200 loaves of bread a day. After hiring 1 additional worker, the total output rises to 240 loaves. What has happened to labour productivity?

Question 6

2 marks

State what is meant by capital-intensive production.

Write your answer out first, then check it against the worked solution.

Question 7

4 marks

Explain two reasons why a firm might choose to adopt a labour-intensive production process instead of a capital-intensive one.

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Question 8

2 marks

Identify two factors that can influence a firm's demand for factors of production, such as labour or capital.

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Question 9

4 marks

A small manufacturing firm currently produces 2,000 units of a product per month. It employs 10 full-time workers, each working 160 hours per month. The firm is considering investing in new automated machinery to increase its output to 2,800 units per month while reducing its workforce to 7 workers.

(a) State what is meant by labour-intensive production.
(b) Calculate the labour productivity (output per worker) before and after the proposed investment in machinery.
(c) Identify one reason, other than a change in labour productivity, why a firm might decide to switch from labour-intensive to capital-intensive production.

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Question 10

5 marks

A factory is considering changing its production process to increase its efficiency.

(a) Analyze two factors that would influence a firm's demand for labour.
(b) Explain the difference between production and productivity.

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