O-LevelEconomicsThe basic economic problem2281/21 · May/June 2015 · Q220 Marks

In 2013, an earthquake on the Iran/Pakistan border destroyed many factories and homes. Some officials wanted the Governments to rebuild the factories and homes, even though there would be an opportunity cost. Others suggested that some people should be encouraged to emigrate.

(a)Define 'opportunity cost'.[2]
(b)Explain why the economic problem can never be solved.[4]
(c)Using a production possibility curve diagram, analyse the effect of the destruction of some of its resources on an economy.[6]
(d)Discuss whether a country will benefit from the emigration of some of its people.[8]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

[1] (next) best alternative
[1] forgone
[1] the economic problem is scarcity
[1] infinite wants
[1] finite resources
[1] wants exceed resources
[1] as wants grow faster than resources/growth of resources will not exceed growth of wants
[1] axes correctly labelled
[1] original curve/downward sloping line to axes
[1] new curve present
[1] shift to the left clearly indicated either by an arrow or by labelling
[1] the destruction of resources will reduce the maximum output a country can produce
[1] this will move the production possibility curve to the left/closer to the origin
[1] emigration of dependents
[1] would reduce the burden on the working population
[1] reduce government spending on benefits/pensions
[1] which means government spending on other items can increase
[1] if there is overpopulation/population above the optimum level
[1] output per head should rise/more efficient use can be made of resources
[1] workers who emigrate may send money back to relatives
[1] this may increase living standards
[1] emigrants may later return to the country bringing new skills with them
[1] this may raise the productivity of the labour force
[1] skilled workers may emigrate
[1] this will reduce the quality of the labour force
[1] lowering productivity
[1] discouraging multinational companies setting up in the country
[1] if people of working age emigrate
[1] the dependency ratio will increase
[1] if there is under-population/population below the optimum level
[1] output per head would fall/less efficient use can be made of resources
[1] with lower output less advantage can be taken of economies of scale