Explain, with the aid of a production possibility curve (PPC) diagram, why scarcity makes choice inevitable for firms and how each choice has an opportunity cost.

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. [2] Up to 2 marks for Knowledge and Understanding
2. [1] For correct diagram: Vertical axis correctly labelled, e.g. Good A, agricultural goods/consumer goods, and horizontal axis correctly labelled, e.g. Good B, manufactured goods/capital goods
3. [1] PPC drawn as a curve or a straight line, showing trade-off between production of two goods
4. [6] Up to 6 marks for Application
5. [2] Use of the production possibility curve to explain: scarcity
6. [2] Use of the production possibility curve to explain: choice
7. [2] Use of the production possibility curve to explain: opportunity cost
8. [8] Up to 8 marks for Analysis
9. [4] Analysis of the production of public goods by a government, with the use of appropriate examples
10. [4] Analysis of the production of other goods by a government, such as merit goods, with the use of appropriate examples
11. [4] Up to 4 marks for Evaluation
12. For exercising some judgement on whether the only goods that a government should produce are public goods
13. [1] Reserve 1 mark for a conclusion