Production possibility frontiers Theme 1

Answer

A

Mark scheme

Notes from the mark scheme and report

• a computer is a capital good used to produce other goods (A)
• savings and shares are financial assets, not capital goods
• underground oil reserves are natural resources (land)

Answer

D

Mark scheme

Notes from the mark scheme and report

• a cyclone destroys productive capacity, so the PPF shifts inward and X moves to Y on the new curve (D)
• A is an unobtainable point, B a movement along the PPF, C an outward shift

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme

Examiner's comment

In this question, the focus is on having the ability to clearly calculate the opportunity cost of the decision by the farmer to harvest 6 units of wheat at point Y. Candidates were being asked to calculate this change, which is 1 unit of oats. The main issues faced by candidates were either stating the opportunity cost of 4 wheat to 2 oats at point X and 6 wheat to 1 oats at point Y. The question was asking about the reduction in the number of oats. Another issue was to discuss the increase in the production of wheat, which though rewarded, didn't score full marks. In this response the candidate has correctly calculated the opportunity cost as 1 unit of oats. Ensure you read the question carefully so that you give the correct answer in terms of the movement from point X to point Y. In this response, the candidate has calculated the opportunity cost ratios at point X and point Y but has completed an incorrect calculation. This scored 0/2.

Notes from the mark scheme and report

• moving from X (4 wheat, 2 oats) to Y (6 wheat, 1 oats) gives up 1 unit of oats
• report: some gave ratios at X and Y or stated the 2 extra wheat instead of the oats forgone

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Mark scheme

Examiner's comment

This question is looking for a recognition of what would happen to efficiency in the following year, when a farmer operates inside the production possibility frontier, to achieve the knowledge mark. The analysis mark is then given when the candidate explains why efficiency would fall. This was a well answered question, with the majority of candidates scoring both marks. In this response the candidate clearly tells us that point W is inefficient, which achieves the knowledge mark. The explanation that the farmer is not making use of all resources then gets the analysis mark, so 2/2. This second example achieves both marks because the candidate tells us that production at W is inefficient, leading to lower output for both wheat and oats in the following year.

Notes from the mark scheme and report

• W is inside the PPF so resources are inefficiently allocated / unemployed
• the farmer could produce more of both wheat and oats

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• new farming technology shifts the PPF outward to reach Z (B)
• milk machinery is not on this PPF
• demand and price are not shown on a PPF

Mark scheme

Examiner's comment

This question was diagrammatical and identified opportunity cost along a PPF curve. Some responses indicated a lack of understanding of opportunity cost and illustrated shifts in the curve, although the majority understood the question well.

Notes from the mark scheme and report

• move along the PPF from W towards more consumer goods and show the capital goods given up
• shifting the curve does not show opportunity cost

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme, including the levels grid and indicative content

Examiner's comment

Candidates performed less well on this question, though there were many strong responses that explored whether giving such support to students from low income backgrounds was itself not a waste of scarce resources. Many candidates could also identify that students from low income backgrounds could be dissuaded by the thought of significant debt. To gain high marks some use of a diagram such as the PPF would sharpen the analysis, whilst allowing candidates to showcase their broader economic knowledge.

Notes from the mark scheme and report

• 'these drop-out rates' are from Extract B (9% of disadvantaged students vs under 5% of high-income)
• drop-outs waste scarce resources, economy inside its PPF
• evaluate with rising participation (Extract A), whether support schemes are themselves wasteful, debt as the cause
• report: candidates performed less well here

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

A

Mark scheme

Notes from the mark scheme and report

• a natural disaster destroys capacity, so the PPF shifts inward and output falls from X to Y (A)
• B is growth in potential output, C a reallocation along the PPF, D a move from inefficiency to the frontier

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme

Examiner's comment

In this question the focus is on having the ability to apply the concept of opportunity cost to the PPF curves as shown. There are 2 marks for application. The main issue that candidates faced here was failing to correctly read the information as presented; with some candidates identifying the original opportunity cost as 70 or not displaying a clear understanding of opportunity cost and therefore the ability to apply. This often meant that candidates were unable to achieve full marks, since it often led on to incorrect application. This answer scores the full 2 marks. The candidate has identified correctly the original and new opportunity cost. Be clear and concise in these short questions. This candidate correctly identifies 20 as the original opportunity cost to obtain one mark and provides their working as per the mark scheme. They then correctly identify that the calculation of new opportunity cost of 50 capital goods along XZ is 170-140 but then make the computational error of saying this is equal to 70 rather than 30 consumer goods. As an incorrect answer they receive 0 marks for the new opportunity cost despite having the correct working. Overall they achieve 1+0 = 1 mark. Always try to ensure you re-read your work – especially if you allow time for this at the end of the exam.

Notes from the mark scheme and report

• read across at 50 capital goods: on XY 120 - 100 = 20 consumer goods, on XZ 170 - 140 = 30
• report: some misread the PPF and gave 70 as the original opportunity cost

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms); QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

D

Mark scheme

Notes from the mark scheme and report

• outward shift of the PPF on the consumer-goods axis only is a rise in potential output of consumer goods (D)
• A describes a movement from inside the PPF (W to V)
• B and C wrongly link the PPF to costs or demand

Mark scheme

Examiner's comment

Many candidates clearly identified the unemployment of resources and most gained analysis marks operating inside PPF. Marks were lost where candidates stated unemployed resources and allocative efficiency showing dual knowledge but then no analysis so they could only be awarded a single mark. This answer achieves a mark of 1/2. The response does not move beyond showing an understanding of an inefficient allocation of resources. For a 2 mark explain answer it is always advisable to provide some linked development or an example. In this case the diagram provided the opportunity to use quantitative skills by identifying that the economy could produce at either 100 or 140 consumer goods but is currently producing 80. This answer achieves a mark of 2/2. Full marks for correctly explaining position W and analysing with use of the diagram whereby it is possible to increase output of both consumer and capital goods. The candidate displays a concise grasp of the economic concepts covered. Ensure you have a clear understanding of all the economic concepts in the specification.

Notes from the mark scheme and report

• W is inside the PPF: unemployed resources or inefficient allocation
• analysis mark for more of both goods possible (could produce 100 or 140 consumer goods, producing 80)
• two knowledge points without analysis score only 1

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme

Examiner's comment

A small majority of candidates achieved full marks on this question. Most were able to identify a point to the right of W for 1 mark. However, many did not properly indicate the opportunity cost of providing more educational programmes. Some answers also shifted the curve outwards to indicate more educational programmes. This response answers the question precisely, showing a point to the right of W, whilst clearly indicating the opportunity cost of providing more educational programmes. Clearly annotate your diagrams. Opportunity cost is measured on the relevant axes. While this answer shows X as the new output it fails to identify the opportunity cost and only scores 1 mark. Clearly annotate the diagram to show the opportunity cost.

Notes from the mark scheme and report

• mark a new point to the right of W along the PPF and show the fall in popular entertainment output as the opportunity cost on the axis
• report: many did not show the opportunity cost or wrongly shifted the curve outwards

Quantitative skills: QS 4 (construct and interpret a range of standard graphical forms)

Mark scheme

Examiner's comment

Most candidates achieved 1 mark by defining opportunity cost. This question polarised performance with a significant number ignoring the ‘marginal’ content of the question, many calculated the opportunity cost cumulatively in the column provided. Top marks were awarded for completing the columns correctly using marginal analysis and referring to the table for contact to define opportunity cost to score the third mark. This answer achieved 3 out of 3 marks. The candidate began by accurately completing the table as instructed, (1 Application mark). They then provided an accurate, concise definition of opportunity cost (1 Knowledge mark) before linking this as an example to the opportunity cost of the economy of moving from consumer goods to capital goods is initially small compared to gains in production. This was made using numerical references (1 Analysis mark) and the marginal opportunity cost increases again made numerically explicit. Make sure you use the table provided and any calculations you have made to answer the question set. This answer achieved 1 out of 3 marks. The definition provided was correct (1 Knowledge marks). Application was missing from the table with no attempt to complete it and confused in the written response (0 mark for Application). A PPF diagram was drawn but the attempt to link it to the question set was not clear (0 mark for Analysis). It is good practice to start with a definition, but look carefully at what the question is asking you to do with the concept – in this case ‘using marginal analysis’.

Notes from the mark scheme and report

• complete the column marginally: opportunity costs 2, 4, 6, 8, 10, 12 units of consumer goods per extra 10 capital goods (at least two calculations)
• many calculated cumulatively and ignored 'marginal'
• analysis = increasing opportunity cost, PPF concave to the origin

Quantitative skills: QS 9 (interpret, apply and analyse information in written, graphical tabular and numerical forms)

Answer

B

Mark scheme

Notes from the mark scheme and report

• more capital goods raise productive capacity, shifting the PPF outward (B)
• not linked to less specialisation, marginal utility or demand for consumer goods