In 2022, Paraguay’s production possibility curve (PPC) moved to the right. Paraguay operates a mixed economic system. Its government supplies merit goods and public goods. The country’s private sector is a major producer of shampoo. Firms in the shampoo industry use division of labour. There are several firms in the industry, but their number is falling. It may soon be the case that only one firm remains in the industry.
(a)[2]
Identify what is shown on the axes of a production possibility curve.
(b)[4]
Explain, using one example of each, the difference between a merit good and a public good.
(c)[6]
Analyse the ways in which division of labour can help firms.
(d)[8]
Discuss whether consumers would benefit if only one firm produced shampoo.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Outputs of two goods” …