A Level Economics AQA Practice Exam

Capital refers to which of the following?

1. The natural resources available for production

2. The finances needed for investment

3. The structures and equipment used to produce goods and services

4. The knowledge and skills of the workforce

The correct answer is: The structures and equipment used to produce goods and services

Capital in economics specifically refers to the structures and equipment that are utilized in the production of goods and services. This encompasses machinery, tools, buildings, and technology that facilitate the manufacturing process and contribute to the efficiency and effectiveness of production. These tangible assets are essential for businesses to create products and deliver services. While finances are indeed vital for investment, they are categorized as financial capital rather than capital in the physical sense. Natural resources, on the other hand, constitute land, which is a distinct factor of production. Knowledge and skills of the workforce fall under human capital, highlighting the importance of education and training in economic productivity, but they do not define capital as used in the traditional sense of the production factors. Thus, the correct connection is to the physical entities used in production.