O-LevelEconomicsThe basic economic problem2281/11 · May/June 2014 · Q21 Mark

Using all available resources, an economy produces different combinations of two types of goods, clothes and food, shown by the production possibility curve (PPC) below. [Figure 2.1] What does the PPC indicate?

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AIt is more efficient to produce more of clothes than food.

BIt is only possible to increase the output of clothes by reducing the output of food.

CThe best situation is to produce equal units of clothes and food.

DThe cost of producing a unit of clothes is always higher than that of food.

✓ Correct answer

B: It is only possible to increase the output of clothes by reducing the output of food.

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Topic: The basic economic problem, O-Level Economics (syllabus 2281). Multiple choice, 1 mark.
Source: O-Level Economics, May/June 2014 Paper 1 Variant 1, question 2.

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