Introduction to Economics

Interactive OCR GCSE revision questions.

1.1 Scarcity & opportunity cost 1.2 Factors of production 1.3 Resource allocation 1.4 PPC 1.5 Specialisation

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1.1 Scarcity, choice and opportunity cost

Q1. Scarcity occurs because:

resources are unlimited wants are unlimited but resources are limited prices are always rising firms make losses

Q2. Opportunity cost is:

the price of a good the total cost of production the next best alternative forgone government spending

1.2 Factors of production

Q1. Machinery used in factories is an example of:

capital labour land enterprise

Q2. Scarcity means that:

all goods are free governments control all production resources are unlimited choices must be made

Q3. If a government spends more on defence, the opportunity cost may be:

less spending on schools higher inflation higher wages lower taxes

Q4. In economics, the factor of production 'enterprise' refers to:

workers producing goods and services natural resources used in production organising resources and taking risks in business machines used in factories

1.3 Resource allocation

Q1. Resource allocation refers to:

how firms set prices how scarce resources are distributed between different uses how taxes are collected how wages are determined

1.4 Production Possibility Curve (PPC)

Use the diagram to help answer the questions.

Diagram: PPC showing trade-offs and opportunity cost.

Q1. Productive efficiency occurs when output is:

inside the PPC outside the PPC on the PPC when inflation rises

Q2. A point inside the PPC represents:

inefficient use of resources maximum output economic growth perfect competition

Q3. A point outside the PPC is:

inefficient always achievable productive efficiency unattainable with current resources

PPC showing economic growth and outward shift

Diagram: PPC showing outward shift from growth.

Q4. Which factor would cause the PPC to shift outward as shown in the diagram?

higher unemployment improved technology falling productivity fewer workers

Diagram: PPC with increasing opportunity cost.

Q5. Why is the PPC curved in this diagram?

demand is increasing unemployment is falling opportunity cost increases as resources are reallocated prices are rising

Diagram: Movement from A to B along the PPC.

Q6. Moving from point A to point B on the PPC shows:

economic growth opportunity cost unemployment inflation

Q7. If unemployment rises, the economy will move:

outside the PPC (point C) inside the PPC (point D) along the PPC (point B) to productive efficiency

Q8. Producing more capital goods today is likely to:

reduce productivity permanently increase economic growth in the future eliminate opportunity cost reduce employment

1.5 Specialisation

Q1. Division of labour refers to:

workers making the whole product production being split into separate tasks government control of production firms employing only one worker

Q2. One advantage of specialisation is:

higher unemployment higher productivity higher opportunity cost fewer goods produced

Q3. Which is an example of specialisation?

one worker assembling only car doors each worker making a whole car one firm producing many products government controlling production

Q4. Why does specialisation often increase productivity?

workers change tasks frequently firms reduce output firms employ fewer workers workers become skilled at one task

Q5. Countries often specialise in producing goods where they:

have the highest prices have a comparative advantage have the highest wages produce the least output

Q6. Adam Smith argued that division of labour leads to:

higher productivity fewer goods produced higher inflation government planning