Economics 2281 · O Level · Production possibility curve (PPC) diagrams
Production possibility curve (PPC) diagrams — practice question
In 2022, Paraguay’s production possibility curve (PPC) moved rightward. Paraguay has a mixed economic system. Its government supplies merit goods and public goods. The country’s private sector is a major shampoo producer. Firms in the shampoo industry use division of labour. There are several firms in the industry, but the number is declining. It is possible that soon there may be only one firm in the industry.
(a)[2]
Identify what the axes of a production possibility curve measure.
(b)[4]
Explain, using an example for each, the distinction between a merit good and a public good.
(c)[6]
Analyse how division of labour can help firms.
(d)[8]
Discuss whether consumers would gain 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: “Quantities of two different products” …