Cambridge IGCSE Economics: Opportunity cost and production possibility curves (0455) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

This set tests sections 1.3 and 1.4 of the Cambridge IGCSE Economics 0455 syllabus for examination in 2026: opportunity cost and production possibility curves. All names and figures are invented. Teaching is in the study guide and the revision notes. Other links: the Cambridge IGCSE Economics hub, the printable checklist and the free diagnostics.

Questions

1. Define opportunity cost. [2]

2. Meera has 30 units to spend. She would most like a jacket (30), then headphones (26), then a bicycle service (20). She buys the jacket.

(a) State her opportunity cost. [1] (b) Her friend says the opportunity cost is 46 units, the sum of the other two items. Explain the error. [1]

3. Priya gives up a job paying 2,500 a month to study full-time for 18 months. Fees are 4,000 in total and books cost 500 in total.

(a) Calculate the earnings she gives up. [2] (b) Calculate the total cost of her studies, including fees and books. [2]

4. A small firm owns a warehouse. It could rent it out for 1,800 a month. Using it for its own production earns 1,500 a month in profit.

(a) State the opportunity cost of using the warehouse itself. [1] (b) Calculate how much better off the firm would be by renting it out. [1] (c) Suggest what the firm should do and why. [1]

5. A government has 200 million units to spend. A hospital costs 120, a rail link costs 90 and a school costs 60.

(a) Calculate the cost of building the hospital and the rail link, and state whether it can afford both. [2] (b) The government builds the hospital. The next best project was the rail link. State the opportunity cost of the hospital. [1] (c) Explain one reason why the government might still choose the hospital. [2]

6. Country D (invented) produces clothes (thousand garments) and machines. Its production possibilities are:

Machines	0	5	10	15	20
Clothes	90	88	80	60	0

(a) Calculate the opportunity cost, in clothes, of each extra machine when output of machines rises from 5 to 10. [2] (b) State whether opportunity cost is constant or increasing as machine output rises, and explain why. [3] (c) State whether a combination of 10 machines and 85 thousand garments is attainable. Give a reason. [2] (d) Explain what a combination of 15 machines and 45 thousand garments shows. [2]

7. Country G produces textiles and computers. Sketch and label a PPC with textiles on the vertical axis, and show a point on the curve, a point under it and a point beyond it. Describe your diagram in words. [4]

8. Country E (invented) produces 250 units of consumer goods and 40 units of capital goods. With 40 units of capital goods, its PPC allows 320 units of consumer goods.

(a) Calculate the shortfall, and express it as a percentage of the possible output, to one decimal place. [2] (b) Explain one way the economy could reach the PPC. [2] (c) State whether reaching the PPC is actual or potential growth. [1]

9. Country H’s PPC shows a maximum of 200 units of services or 120 units of goods. After some years the maximum is 250 units of services or 150 units of goods.

(a) Calculate the percentage growth in the maximum output of services and of goods. [2] (b) Describe the movement of the PPC. [1] (c) Explain two possible causes of this change. [2] (d) State one cause of an inward shift of a PPC. [1]

10. In Country J, new farming methods raise the maximum output of goods from 120 to 156 units, but the maximum output of services stays at 200.

(a) Calculate the percentage growth in the maximum output of goods. [1] (b) Describe how the PPC changes. [1] (c) Explain whether everyone in Country J is necessarily better off. [2]

11. Country A (invented) has a PPC for consumer goods and capital goods:

Capital goods	0	20	40	60	80
Consumer goods	200	190	170	130	0

It now produces 40 capital goods and 170 consumer goods. The government plans to move to 60 capital goods, expecting the maximum output of consumer goods to rise from 200 to 210 in future.

(a) Calculate the opportunity cost of the move, and the percentage growth the government expects. [2] (b) Evaluate whether the government should make the move. [6]

Answers

1. The value of the best option [1] that is passed up because of the choice [1]. [2] Examiner insight: Answers that say only “what you give up” miss the next best alternative; the word “next” carries the idea.

2. (a) The headphones [1]. [1] (b) Only the single next best option counts, so the 26 for the headphones is the cost and the service is not added [1]. [1] Examiner insight: Naming one item is what is wanted. Adding together the rejected options shows the idea has not been understood.

3. (a) 2,500 × 18 [1] = 45,000 [1]. [2] (b) 45,000 + 4,000 + 500 [1] = 49,500 [1]. [2] Examiner insight: Show the multiplication or addition before the answer. A bare total gives no way of seeing which part was wrong.

4. (a) The rent of 1,800 a month [1]. [1] (b) 1,800 − 1,500 = 300 a month [1]. [1] (c) Rent it out, because the rent is higher than the profit from own use [1]. [1] Examiner insight: A recommendation gains credit when it is backed by the figures. “Rent it out” alone does not use the data.

5. (a) 120 + 90 = 210 [1]. It cannot afford both, since 210 is above 200 [1]. [2] (b) The rail link [1]. [1] (c) The hospital may serve more people or save more lives [1], so the benefit to the community could exceed that of the rail link, even though the rail link was next best [1]. [2] Examiner insight: An explanation needs a reason and a consequence. “It is more important” is a statement; adding who benefits and how turns it into an explanation.

6. (a) Clothes lost = 88 − 80 = 8 [1]. Per machine = 8 / 5 = 1.6 thousand garments [1]. [2] (b) Increasing [1]. Opportunity cost per machine is 0.4, then 1.6, then 4, then 12 [1]. Resources are not equally suited to both goods, so the later switches give up more clothes per machine [1]. [3] (c) Not attainable [1]. At 10 machines the maximum is 80 thousand garments and 85 is more than that [1]. [2] (d) The point is under the PPC [1] because at 15 machines the maximum is 60, so resources are unemployed or used inefficiently [1]. [2] Examiner insight: In (a), name the units: dividing by the number of machines gives the cost per machine. In (c), quote the curve’s figure at that output.

7. Axes labelled, textiles vertical and computers horizontal [1]. A smooth curve bowed outward from the vertical axis to the horizontal axis, labelled PPC [1]. A point A on the curve (full use of resources) [1]. A point B inside the curve (unemployed resources) and a point C outside it (unattainable) [1]. [4] Examiner insight: Unlabelled axes or an unlabelled curve lose credit even if the shape is right. Mark each point with a letter and say what it shows.

8. (a) 320 − 250 = 70 units [1]. 70 / 320 × 100 = 21.9% [1]. [2] (b) Reduce unemployment, for example by retraining workers or increasing demand for the economy’s output [1]. This puts idle resources to work, so more consumer goods are produced without giving up capital goods [1]. [2] (c) Actual growth [1]. [1] Examiner insight: The percentage must use the possible output as the base, as the question says. Dividing by 250 gives a different figure.

9. (a) Services: (250 − 200) / 200 × 100 = 25% [1]; goods: (150 − 120) / 120 × 100 = 25% [1]. [2] (b) An outward shift on both axes, by the same proportion [1]. [1] (c) Any two linked causes, for example: investment in more machines raises the output each worker can produce [1]; better education and training raises the quality of labour [1]. [2] (d) A war (or flood, disease, loss of skilled workers) [1]. [1] Examiner insight: A cause scores when it is tied to capacity. “Technology” alone is a label; “technology that raises output per worker” is a cause.

10. (a) (156 − 120) / 120 × 100 = 30% [1]. [1] (b) The PPC shifts outward on the goods axis only, so the intercept on the services axis does not move [1]. [1] (c) Not necessarily [1]. The gain is potential output, and it benefits people only if resources are fully used and the extra goods are shared among the population (or farmers’ gains could go to a few landowners) [1]. [2] Examiner insight: Take care over which axis the shift is on. This data shows growth on one axis only, not both.

11. (a) Consumer goods lost = 170 − 130 = 40 [1]. Growth expected = (210 − 200) / 200 × 100 = 5% [1]. [2] (b) Judgement and reasons, for example:

• Case for: more capital goods make workers more productive and raise future capacity, shifting the PPC outward [1]. The expected rise of 5% means more consumer goods in future [1].
• Case against: consumers give up 40 units now, a fall of 23.5% in consumer goods [1]. The opportunity cost rises as capital output grows, from 10 to 20 to 40 consumer goods per 20 capital goods [1].
• Evaluation: the benefit is expected, not certain, and may arrive late. The decision depends on how poor current consumers are, on how long the gain takes, and on whether the capital goods are well chosen [1].
• Judgement: a supported conclusion, for example that the move is worthwhile if the country can afford lower consumption for a few years and the investment is well used [1]. [6] Examiner insight: An evaluative answer weighs both sides and reaches a conclusion that follows from the figures. Listing benefits and costs with no final judgement leaves the question only partly answered.

Where marks are usually lost

• Writing the price paid instead of the benefit of the next best alternative.
• Listing every rejected option as the opportunity cost.
• Leaving out earnings forgone when finding the total cost of studying.
• Dividing the wrong way round, or not dividing by the number of units gained.
• Not naming both goods, or not stating units, in a PPC answer.
• Saying a point beyond the curve is possible, or calling a point under it “efficient”.
• Drawing a growth shift inside the old curve, or moving along the curve when asked for a shift.
• Using the wrong base for a percentage.
• Giving causes of growth without saying how they change capacity.
• Weighing up only one side in an evaluation question.

Next steps

• Revisit the revision notes for the method boxes.
• Reread the study guide for any question you missed.
• Check the Cambridge IGCSE Economics hub and the printable checklist.
• Take the free 10-minute diagnostics to find your next weak spot.
• Book a free trial class if you want help from a teacher.

Official syllabus

Cambridge IGCSE Economics 0455 syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment: sections 1.3 Opportunity cost and 1.4 Production possibility curve (PPC) diagrams.