A Level Economics: Basic economic ideas and resource allocation, questions with answers

Answer: C. holiday

Clothing, food and water are basic needs; a holiday is a want.

Answer: C. property

Wealth is a stock of assets (e.g. property); interest, profits and incomes are flows of money received over a period of time.

Answer: A. fertilisers

Land refers to natural resources as given by nature. Fertilisers are manufactured (a capital/intermediate good), whereas fisheries, forests and coal are natural resources.

Answer: D. the loss of some new buildings

Opportunity cost is the next best alternative forgone. The $800 000 was diverted from the new buildings budget, so the opportunity cost is the new buildings that can no longer be built — not simply the dollar figure itself.

Answer: C. In 2018, the Supreme Court said the government must review pension payments because they are unrealistic.

A normative statement contains a value judgement (here, that the payments are "unrealistic") rather than a statement of verifiable fact.

Answer: C. the potential salary as a teacher

Opportunity cost is the value of the best alternative forgone. By remaining a doctor she gives up the salary she could have earned as a teacher.

Indicative content — an increase in the quantity of resources (land, labour, capital or enterprise) enables an economy to produce more of all goods, shifting the PPC outward. However, it is not only quantity: an increase in the quality/productivity of resources can also shift the PPC to the right, as can technological change. Evaluation should weigh the relative influence of the quantity versus the quality of resources (and technology) in expanding an economy's productive capacity, reaching a conclusion on whether an increase in the quantity of resources is the only cause.

Marked using Table A (AO1 Knowledge and understanding and AO2 Analysis, out of 8) and Table B (AO3 Evaluation, out of 4): Level 1 (1–5/1–3) largely descriptive/one-sided responses; Level 2 (6–10/—) some development, largely relevant; Level 3 (11–14/4–6) balanced, well-developed, accurate and reaches a justified conclusion.

(a) Knowledge and understanding (2 marks max): private goods are consumed by an individual for their own benefit, are rival in consumption (consumption by one prevents consumption by another) and excludable (others can be excluded); public goods are non-rival, non-excludable and non-rejectable. Application (up to 6 marks): using examples of merit goods (e.g. education, healthcare) to show they are rival/excludable (private good characteristics), contrasted with examples of true public goods (e.g. street lighting, defence, police) which lack these characteristics. 8 marks total. …

The full model answer is in the app.