Which are considered the most important factors of production?
Correct answer B. Labour, land and capital
Topic / 14 questions
Production Factors MCQs
Production Factors MCQs cover the markets for labour, land and capital, including how firms decide how much of each factor to hire and how factor incomes are set. They help economics students, CSS candidates and lecturer test takers. Every question shows its correct answer instantly, so you can check your understanding of factor markets.
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How is the value of the marginal product of labour defined?
Correct answer B. The price of the output times the marginal product of labour
What effect does a fall in demand for fish have?
Correct answer B. It decreases the value of the marginal product of fishermen, reduces their wage and reduces employment in the fishing industry
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An increase in the demand for apples will cause all of the following EXCEPT which one?
Correct answer D. A decrease in the number of apple pickers employed
If input and output markets are competitive and firms maximise profit, what does each factor of production earn in equilibrium?
Correct answer A. The value of its marginal product
What does an increase in demand for a firm’s output do?
Correct answer A. It increases the prosperity of both the firm and the factors hired by the firm
Which statement is NOT true of workers with a high value of marginal product?
Correct answer C. Usually have little capital with which to work
When capital is owned by firms rather than directly by households, capital income can take any of these forms EXCEPT which one?
Correct answer D. Increases in stocks of goods
If a factor shows diminishing marginal product, what will hiring extra units of it do?
Correct answer A. Generate ever smaller amounts of additional output
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For a competitive, profit-maximising firm, what does the value-of-the-marginal-product curve for capital represent?
Correct answer B. Demand curve for capital
Why does an individual firm’s demand curve for a factor of production behave as it does?
Correct answer D. It slopes downward due to the factor's diminishing marginal product
Up to what point should a competitive, profit-maximising firm hire workers?
Correct answer A. Where the value of the marginal product of labour equals the wage
How does a rise in the price of cars affect the demand for car workers?
Correct answer D. It shifts right and increases the wage
Suppose a war is fought with biological weapons that kill people but leave capital intact. Compared with before the war, what is likely to happen to equilibrium wages and rental rates?
Correct answer B. Wages rise and rental rates fall
About Production Factors MCQs
Questions in this set focus on derived demand. A firm's demand for a factor depends on demand for its output, so an increase in output demand raises the demand for workers. You will see items on the value of marginal product curve, which is the competitive firm's demand curve for labour or capital, and the rule that a profit-maximising firm hires labour until the value of marginal product equals the wage. Other questions cover the main factors of production, forms of capital income such as interest and dividends, and factor payments in competitive equilibrium.
Exams that include Production Factors MCQs
Pakistan
- CSS
- PMS
- PPSC Lecturer tests
- FPSC
India
- UGC NET
- UPSC CSE
- State PSC exams
Bangladesh
- BCS
- University admission tests (DU, RU, JU)
Frequently asked questions
What are the factors of production?
The factors of production are the inputs used to produce goods and services. Economics usually lists land, labour and capital, and many textbooks add entrepreneurship. Their rewards are rent for land, wages for labour, interest for capital and profit for the entrepreneur.
How many workers should a competitive firm hire?
A competitive, profit-maximising firm hires workers up to the point where the value of the marginal product of labour equals the wage. Hiring beyond that point adds more to costs than to revenue, so profit falls. The value of marginal product curve is the firm's labour demand curve.
How many Production Factors MCQs are on MCQs360?
MCQs360 has 16 Production Factors MCQs, free to practise with no sign-up and with instant answers. They make a compact set for revising factor demand and marginal product before economics exams. Revise the value of marginal product rule first, since most questions depend on it.
Last reviewed October 2026