Fig. 1 shows a production possibility curve for a country using all of its available factors of production to make rice and solar panels. Rice outputSolar p...

Assessment: Economics 9214 | Paper 1 Mock 01 | Written Paper 1 Subject: Economics - 9214

Question 1 Report

Fig. 1 shows a production possibility curve for a country using all of its available factors of production to make rice and solar panels.

Rice outputSolar panelsABC© EAGLE BEACON GLOBAL

(a) Which point is currently unattainable with the country's existing resources and technology? [1]
(b) Explain why producing more rice involves an opportunity cost. [2]
(c) Analyse how improved solar-panel technology could affect the curve and the economy's potential output. [3]

Answer Details

(a) The unattainable point is point C. It lies outside the production possibility curve, so it cannot be produced using the country’s existing resources and technology. [1 mark]

(b) Opportunity cost is the next best alternative forgone when a choice is made. Resources are limited. If more land, labour and capital are used to produce rice, fewer resources remain for solar panels. Therefore, more rice means that some solar-panel output must be forgone. [2 marks]

(c) Improved solar-panel technology makes production more efficient. The production possibility curve shifts outwards, especially in the direction of solar panels. With the same factors of production, the country can produce more solar panels, or a greater combination of rice and solar panels. Its productive capacity and potential real GDP therefore increase. [3 marks]

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