Economics

1. 1.

   Fictional case: Luma council uses its only vacant site for a library instead of a clinic. Explain opportunity cost and identify it here.

   [2 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. The site cannot serve both uses. Compare the benefit sacrificed when choosing the library: the clinic is the specified next best alternative.

   Marking points

   • Opportunity cost is the value of the next best alternative forgone.
   • It is the benefits of the forgone clinic, not the library's construction bill.

   Examiner tip: Identify a forgone benefit, not simply money spent.

2. 2.

   Explain why an economy can have unemployed workers and still face scarcity.

   [3 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Separate the amount available from how efficiently it is used. Moving toward the production frontier raises output without eliminating competing uses of finite resources.

   Marking points

   • Scarcity means resources are insufficient to satisfy all wants.
   • Unemployment indicates underuse of available labour, not unlimited resources.
   • Using idle labour reduces waste but choices remain necessary.

   Examiner tip: Scarcity and productive inefficiency are different concepts.

3. 3.

   Fictional case: on Nera's production frontier, output changes from 80 food units and 20 machines to 68 food units and 24 machines. Calculate the food opportunity cost per extra machine over this interval and explain why it need not be constant elsewhere.

   [3 marks]

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Use changes, not total outputs: divide the loss of food by the gain of machines. This is an interval average; specialised land or labour may make subsequent transfers more costly.

   Marking points

   • Food forgone = 80 - 68 = 12 units.
   • Extra machines = 24 - 20 = 4; cost = 12/4 = 3 food units per machine.
   • Differing resource suitability can raise marginal opportunity cost as machinery expands.

   Examiner tip: Express the answer in food per machine, not machines per food unit.

4. 4.

   Fictional case: a flood destroys factories in Vela while demand is unchanged. Distinguish a movement inside a production frontier from an inward shift and explain which description fits destruction.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Ask whether resources are merely idle or no longer exist. Flood destruction removes capacity; transport disruption can also prevent remaining resources from being fully used.

   Marking points

   • An interior point means output below capacity with the existing resource stock.
   • An inward shift means maximum feasible combinations fall.
   • Factory destruction reduces capital stock, shifting the frontier inward.
   • Temporary idle surviving factories may additionally place actual output inside the new frontier.

   Examiner tip: State what happens to capacity separately from actual production.

5. 5.

   Fictional case: Orin has poor rural access to drinking water. Evaluate allocating water solely through market prices rather than public provision.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. One defensible judgement favours a basic subsidised allowance with higher charges for excess use. It protects essential access while preserving some scarcity signal; administrative capacity and water losses determine success. Other justified conclusions are acceptable.

   Marking points

   • Indicative: prices signal scarcity and can encourage conservation.
   • Develops how purchasing power can exclude poor rural households despite need.
   • Public provision can extend access but requires funding and effective delivery.
   • A justified judgement weighs access against conservation and considers targeted support or regulated tariffs.

   Examiner tip: Need and ability to pay are not interchangeable measures of welfare.

6. 6.

   Fictional case: Daro can expand either vocational training or current hospital care from a fixed budget. Evaluate the claim that training should always take priority because it expands future productive capacity.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Future output is one objective, not the only one. If hospitals are severely overloaded, extra care may save lives and preserve human capital; well-targeted training can still be valuable. Decide at the margin using local need and expected returns, not the word 'always'.

   Marking points

   • Indicative: training can improve skills and shift future capacity outward.
   • Forgone hospital care has immediate welfare and possible labour-productivity costs.
   • Training benefits depend on completion, relevant skills and available jobs.
   • Rejects an unconditional rule with a reasoned comparison of urgency, time horizon and marginal benefits.

   Examiner tip: Challenge the absolute claim using a specified condition, not a vague 'it depends'.

Original, unofficial practice questions from SubjectScout — not official past-paper questions.