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O-LevelEconomicsThe allocation of resources2281/21 · May/June 2021 · Q220 Marks

There is an area of rubbish, three times the size of France, floating in the Pacific Ocean called the Great Pacific Garbage Patch. It is made up of rubbish including old fishing nets but most is plastic waste. It is forecast that, by 2050, there will be more plastic in the Pacific Ocean than fish. A number of islands in the Pacific Ocean specialise in fishing. Greater pollution will increase the social cost of the fishing industry.

  1. (a)Identify the two types of costs that make up social cost.[2]
  2. (b)Explain two causes of a shift to the right in the demand curve for fish.[4]
  3. (c)Analyse how cleaning up pollution could benefit an economy.[6]
  4. (d)Discuss whether or not countries specialising benefits consumers.[8]

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

  1. [1] Private costs (1)
  2. [1] External costs (1).
  3. [1] Rise in the price of a substitute for fish (1) people will switch away from buying e.g. chicken to buying fish (1).
  4. [1] Fall in the price of a complement for fish (1) people will buy more of the complement (1).
  5. [1] A rise in income (1) people will be able to afford to buy more fish (1).
  6. [1] A report stating eating fish is good for health / changes in tastes (1) people may buy more fish to try to increase their life expectancy (1).
  7. [1] Increase in population size (1) more people to buy fish (1).
  8. [1] A successful advertising campaign (1) may persuade more people to buy fish (1).
  9. [1] Will reduce external costs (1) improve health / less sickness (1) raise quality of life / standard of living (1).
  10. [1] Less (government) spending on healthcare (1) more can be spent on other priorities e.g., education (1).
  11. [1] Cleaning up pollution may create jobs / employment (1) reduce unemployment (1) may attract MNCs (1) increase in incomes (1) reduction in poverty (1).
  12. [1] Recycling of some of the material collected (1) could increase the country's output (1) less use of non-renewable resources (1).
  13. [1] Better working conditions (1) productivity of labour could increase (1) reduce costs of production (1) increase output (1) reduce unemployment (1) reduce inflation (1).
  14. [1] Improve the environment (1) Increase tourism (1) increase exports of services (1) improve the current account position (1).
  15. [1] Reduction in ocean pollution (1) will improve fish stock (1) improve quality of fish (1) greater catches of fish (1) leading to rise in incomes / revenue / GDP (1).
  16. [1] countries may specialise in what they are best at producing
  17. [1] output may rise
  18. [1] greater availability
  19. [1] costs of production may fall
  20. [1] prices may fall
  21. [1] quality may rise
  22. [1] better paid jobs increasing purchasing power of consumers
  23. [1] a country may gain a monopoly of production, raising price and lowering quality
  24. [1] choice may be reduced / greater reliance on imports
  25. [1] other countries' producers may have lower health and safety standards
  26. [1] supply problems may affect a particular country, cutting off supplies
  27. [1] trade disputes may cut off supplies

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About this question

Topic
The allocation of resources, O-Level Economics (syllabus 2281). Structured question, 20 marks.
Source
O-Level Economics, May/June 2021 Paper 2 Variant 1, question 2.

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