1.

4 Production possibility curve diagrams (PPC)

NO Question
1. 2 Production involves the use of the four factors of production. The use of these resources
involves an opportunity cost.

(b) Using a production possibility curve, explain what is meant by opportunity cost. [6]

0455 June 2013 Paper 22 Question 2 b

2. 2 Economic decisions involve an opportunity cost. This can clearly be seen in a production
possibility curve.

(b) Using a production possibility curve diagram, explain how it can show the concept of
opportunity cost. [6]

0455 Nov.2013 Paper 21 Question 2 b

3. 2 In 2012, the Indian Prime Minister announced that the Government was going to spend US$90
million on sending a spaceship to the planet Mars. Some economists argued that it would be
better to use the factors of production, such as land and labour, to improve education or to build
more roads.

(c) Using a production possibility curve diagram, analyse the impact of an increase in resources on
an economy. [5]

0455 June 2014 Paper 22 Question 2 c

4. 2 A number of economies are devoting more of their resources to the provision of health care.
Due to the economic problem, this involves them having to make difficult choices.

(b) Using a production possibility curve diagram, explain why choices have to be made as to how
to allocate resources. [6]

0455 June 2014 Paper 22 Question 2 b

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5. 2 In 2012, a few countries experienced a decrease in their factors of production, including labour
and enterprise. New Zealand, however, experienced an increase in both the quantity and quality
of its factors of production. In the same year, the country exported more agricultural and
manufactured goods.

(c) Using a production possibility curve diagram, analyse the effect of a decrease in the supply of
labour and enterprise on an economy. [5]

(d) Discuss whether an increase in the quality of a country’s factors of production will always
increase its exports. [7]

0455 June 2014 Paper 23 Question 2 c, d

6. 2 All countries face the economic problem and so choices have to be made.

(c) Using a production possibility curve diagram, explain how the curve can be used to show the
consequences of a change in the allocation of resources between the production of two goods. [6]

0455 Nov.2014 Paper 21 Question 2 c

7. 2 In 2013, an earthquake on the Iran/Pakistan border destroyed many factories and homes. Some
officials wanted the Governments to rebuild the factories and homes, even though there would
be an opportunity cost. Others suggested that some people should be encouraged to emigrate.

(c) Using a production possibility curve diagram, analyse the effect of the destruction of some of
its resources on an economy. [6]

0455 June 2015 Paper 21 Question 2 c

8. 2 Students have to consider the opportunity cost of going to university. University graduates
usually earn more than people who have not gone to university. Having more graduates
influences a country’s production possibility curve. Some economists suggest that students should
pay the full cost of their university courses and accommodation. Others say that the government
should pay some or all of the cost.

(d) Discuss whether graduates should pay the full cost of their university education. [8]

0455 June 2015 Paper 22 Question 2 d

9. 2 In 2009, the unemployment rate in Spain was 8% and the annual inflation rate was 3%. By April
2013, the unemployment rate had reached a record 27% but the annual inflation rate had fallen
to 2%. The resulting rise in government spending on unemployment benefits involved an
opportunity cost.

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 (c) Using a production possibility curve diagram, analyse the effect of an increase in
unemployment on a country’s output.

0455 June 2015 Paper 23 Question 2 c

10. 2 In 2009, the unemployment rate in Spain was 8% and the annual inflation rate was 3%. By April
2013, the unemployment rate had reached a record 27% but the annual inflation rate had fallen
to 2%. The resulting rise in government spending on unemployment benefits involved an
opportunity cost.

(c) Using a production possibility curve diagram, analyse the effect of an increase in
unemployment on a country’s output. [6]

0455 Nov.2015 Paper 23 Question 2 c

11. 7 Many economists are predicting that relative poverty will increase whilst absolute poverty will
fall in both India and the United States of America. The level of poverty can be influenced by, for
example, education, the technology used and the number of new businesses created, including
sole proprietorships.

(c) Analyse, using a production possibility curve, the effect of advances in technology. [6]

0455 June 2016 Paper 23 Question 7 c

12. 5 The unemployment rate in Wales fell from 8.2% in March 2013 to 6.8% in March 2014. One in
four workers in Wales is employed in the public sector. A high proportion of workers are
employed in multinational companies, including a Japanese car producer and a South Korean
electronics firm.

(c) Using a production possibility curve diagram, analyse the effect of a decrease in
unemployment on an economy’s output. [6]

0455 Nov.2016 Paper 22 Question 5 c

13. 6 Japan’s birth rate is falling. Its population is ageing, and declining at a faster rate than any other
country’s population. This has an impact on the amount that the Japanese Government spends on
pensions. Its government is considering measures to increase the country’s birth rate and to
encourage immigration.

(c) Analyse, using a production possibility curve diagram, what effect net immigration is likely to
have on an economy. [6]

0455 June 2017 Paper 21 Question 6 c

14. 3 Firms use different quantities of land, labour, capital and enterprise in producing their products.

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 The ways in which a country’s resources can be used, and the extent to which they are employed,
can be shown on a production possibility diagram.

(c) Analyse, using a production possibility diagram, the effect on an economy’s output when there
is a change from full employment to unemployment. [6]

0455 June 2017 Paper 22 Question 3 c

15. 6 The production process in the oil industry is capital-intensive. The pollution it generates means
it is one cause of environmental market failure. A Nigerian oil monopoly is starting to produce
more environmentally friendly liquefied petroleum gas (LPG), rather than kerosene, in an attempt
to reduce pollution. The Nigerian government intends to split the monopoly firm into separate
companies to improve efficiency.

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of reallocating
resources from kerosene to LPG. [6]

0455 June 2018 Paper 23 Question 6 c

16. 4 In March 2017, Peru was hit by floods and the strongest winds in decades. Roads, bridges,
houses and capital goods were destroyed. It is expected that the damage caused will affect Peru’s
Human Development Index (HDI) and economic growth rate. In 2016, Peru experienced a 4%
economic growth rate which was higher than the growth rate of the USA.

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of damaging weather on
an economy. [6]

0455 June 2019 Paper 22 Question 4 c

17. 5 Australian firms have been praised for introducing new technology. The actions of some of these
firms, however, cause market failure. The Australian government uses subsidies, among other
policies, to reduce market failure. Government spending is used both to improve the performance
of individual markets and the macroeconomy. The Australian government increased its spending
in 2017, in part to reduce unemployment.

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of advances in
technology on an economy. [6]

0455 June 2020 Paper 21 Question 5 c

18. 3 Ireland has one of the lowest rates of corporation tax in Europe. This has encouraged many
multinational companies (MNCs) to produce in Ireland. Other reasons why firms want to produce
in Ireland include access to freer trade with other European countries, higher labour productivity
and government grants.

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(c) Analyse, using a production possibility curve (PPC) diagram, the impact of higher labour
productivity on an economy. [6]

0455 June 2020 Paper 23 Question 3 c

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