Pearson Edexcel A Level · Economics A (9EC0)
5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on 1.1.4 Production possibility frontiers.
An economy is producing at a point on its production possibility frontier (PPF) using all its resources. It currently produces 40 units of capital goods and 100 units of consumer goods. If the economy decides to increase capital goods production to 55 units, and the production of consumer goods must fall to 70 units, what is the marginal opportunity cost of each extra unit of capital goods in terms of consumer goods?
A production possibility frontier (PPF) is drawn with capital goods on the Y-axis and consumer goods on the X-axis. The frontier is concave to the origin. If the economy experiences a significant influx of skilled migrant labor, how would this be represented on the diagram, and what does the concave shape imply about opportunity cost?
An economy produces two types of goods: consumer goods and capital goods. The table below shows the maximum output combinations of the economy on its Production Possibility Frontier (PPF):
$$\begin{array}{|c|c|c|}\hline \text{Combination} & \text{Capital Goods (units)} & \text{Consumer Goods (units)} \\ \hline A & 0 & 100 \\ \hline B & 20 & 90 \\ \hline C & 40 & 70 \\ \hline D & 60 & 40 \\ \hline E & 80 & 0 \\ \hline \end{array}$$
What is the opportunity cost of increasing the production of capital goods from \(20\) units to \(60\) units?
In the diagram of a production possibility frontier (PPF), an economy moves from point A (producing \(100\) capital goods and \(50\) consumer goods) to point B (producing \(60\) capital goods and \(80\) consumer goods). What is the marginal opportunity cost of producing one extra consumer good in this range?
An economy is operating on its Production Possibility Frontier (PPF). If there is a significant improvement in the technology used to produce capital goods, while the technology for consumer goods remains unchanged, which of the following describes the most likely shift of the PPF?
Explain the economic rationale for why a standard Production Possibility Frontier (PPF) is typically drawn concave to the origin (bowed outward) rather than as a straight downward-sloping line.
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An economy currently operating inside its Production Possibility Frontier (PPF) reallocates its idle resources toward producing a higher proportion of capital goods relative to consumer goods. Explain the short-run effect on current output and the long-run impact on the economy's PPF.
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Explain one reason why an economy might experience an outward shift of its production possibility frontier (PPF) following a significant increase in net investment.
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