Cambridge O Level Economics: Production possibility curve (PPC) diagrams (2281) – 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.

These questions cover section 1.4, Production possibility curve (PPC) diagrams, of the Cambridge O Level Economics 2281 syllabus for examination in 2026: the definition, drawing and interpretation of a PPC, points under, on and beyond it, movements along it and shifts of it. All figures are invented. Read the study guide and revision notes first if you need to and the earlier basic economic problem practice set. See also the course hub, the checklist and the free diagnostics.

Questions 2 to 8 and 10 use this table for the island of Kellan, which makes only grain and cloth. Each row is the most of one good it can make with the stated amount of the other.

Point	Grain (thousand tonnes)	Cloth (thousand metres)
A	0	120
B	20	116
C	40	104
D	60	84
E	80	52
F	100	0

Questions

1. (a) Define a production possibility curve. [2] (b) State what each axis of a PPC measures. [1]

2. Draw the Kellan PPC with grain on the horizontal axis. Describe what you label and how you join the points. [3]

3. Kellan is considering three output combinations (grain, cloth): T (20, 100), R (60, 84) and S (80, 60). For each, state whether it lies under, on or beyond the PPC, and what that means for the economy. [3]

4. (a) Kellan moves from point D to point E. State the opportunity cost of the extra 20 thousand tonnes of grain. [2] (b) Calculate the opportunity cost, in cloth, of one extra thousand tonnes of grain when moving from A to B, and again from E to F. [2] (c) Explain why the figure in (b) differs between the two moves. [2]

5. Kellan is producing 40 thousand tonnes of grain and 90 thousand metres of cloth. (a) Explain where this point lies and calculate the extra cloth possible without less grain. [2] (b) Give two reasons why the economy might be producing at this point. [2] (c) Explain why moving to the PPC from here need not have an opportunity cost. [2]

6. Kellan’s government wants point S (80, 60). (a) Explain why S cannot be reached now. [2] (b) State two changes that could make it attainable in future. [2] (c) After a period of growth maximum cloth at each grain level is 20% higher. Show whether S is then attainable. [2]

7. State what happens to Kellan’s PPC, or to its production point, in each case. (i) A flood destroys factories and farmland. [1] (ii) A new seed raises the grain that each worker can produce; cloth methods are unchanged. [1] (iii) The government moves workers from cloth mills into farming. [1] (iv) A rise in the size of the working population, with other resources unchanged. [1] (v) Explain why an outward shift of the PPC is described as economic growth. [2]

8. Kellan’s grain technology improves so that the maximum grain it can produce rises from 100 to 125 thousand tonnes. The maximum cloth stays at 120 thousand metres. (a) Calculate the percentage increase in maximum grain output. [1] (b) Describe how the new curve differs from the old one. [2] (c) Explain one consequence of this change for the people of Kellan. [3]

9. Choose the best answer for each. (a) A point beyond a PPC shows output that is: A unattainable with present resources and technology, B inefficient, C the same as an outward shift, D possible only with unemployment. [1] (b) Which event is shown by an inward shift of a PPC? A a fall in unemployment, B a loss of productive capacity, C choosing more of one good, D a movement along the curve. [1] (c) Moving along a PPC from more cloth to more grain shows: A economic growth, B opportunity cost, C unused resources, D a fall in resources. [1]

10. North and South have the same PPC as Kellan today. North produces 30 units of capital goods a year. South produces 10. Assume that each 10 units of capital goods a year raises the maximum output of every good by 0.5% a year, compounded. (a) Calculate each country’s yearly growth in maximum output. [2] (b) Calculate each country’s maximum cloth output after 10 years, to one decimal place. [2] (c) Explain the opportunity cost for North of choosing more capital goods now. [2] (d) Decide whether North’s choice is better for its people. [2]

11. Marva can make food and housing. Its PPC is a straight line from 90 units of food (no housing) to 45 units of housing (no food). (a) State the opportunity cost of one unit of housing. [1] (b) Calculate the most food Marva can make if it makes 30 units of housing. [1] (c) Better farming methods raise maximum food to 120 units; maximum housing is unchanged. Calculate the most food Marva can then make alongside 30 units of housing. [2] (d) Calculate the new opportunity cost of one unit of housing, to 2 decimal places. [1] (e) Explain why the new curve is not parallel to the old one. [1]

12. “Our economy is producing on its PPC, so there is nothing to improve.” Evaluate this claim. [6]

Answers

1. (a) A PPC shows the maximum combinations of two goods [1] an economy is able to make from its current resources and technology if all are fully and efficiently used [1]. (b) Output of one good on each axis (for example units of grain and units of cloth) [1]. [3] Examiner insight: Include both “maximum” and “fully used” in a definition.

2. Label the axes “Grain (thousand tonnes)” and “Cloth (thousand metres)”, with scales [1]. Plot A(0, 120), B(20, 116), C(40, 104), D(60, 84), E(80, 52) and F(100, 0) accurately [1]. Join with a smooth curve bowed outwards from the origin, and label it PPC [1]. [3] Examiner insight: Unlabelled axes and straight ruled segments are usual ways to lose credit on a drawing.

3. T: cloth at 20 grain can reach 116 and T has only 100, so T is under the curve, meaning resources are unused or inefficiently used [1]. R is on the curve, so resources are fully and efficiently used [1]. S: at 80 grain the most cloth is 52, so 60 is beyond the curve and unattainable at present [1]. [3] Examiner insight: Give the reason as well as the label.

4. (a) Grain rises by 20 and cloth falls from 84 to 52 [1], so the opportunity cost is 32 thousand metres of cloth [1]. (b) A to B: (120 - 116) / 20 = 0.2 thousand metres per thousand tonnes [1]. E to F: (52 - 0) / 20 = 2.6 thousand metres per thousand tonnes [1]. (c) Resources are not equally good at both goods [1]; the first moved to grain suit it best, later ones suit cloth, so more cloth is lost per tonne [1]. [6] Examiner insight: State opportunity cost as an amount of the other good, not money.

5. (a) At 40 grain the most cloth is 104, so (40, 90) is under the PPC [1]. Extra cloth is 104 - 90 = 14 thousand metres [1]. (b) Any two of: unemployed workers or idle factories; resources used inefficiently, such as poor organisation; a downturn in demand leaving spare capacity [2]. (c) Unused or badly used resources can be put to work [1], so more of one good, or both, is possible without taking resources from anything else [1]. [6] Examiner insight: Link the answer to unused resources; “it is inside the curve” repeats the question.

6. (a) At 80 thousand tonnes of grain the most cloth is 52, below the 60 wanted [1], so S needs more resources or better technology than Kellan has now [1]. (b) Any two of: more or better capital; a larger or better-trained labour force; improved technology; new land or raw materials [2]. (c) Cloth at 80 grain becomes 52 x 1.2 = 62.4 [1]. Since 62.4 is at least 60, S is now inside the new curve and attainable [1]. [6] Examiner insight: End a calculation with a comparison and a conclusion.

7. (i) Inward shift of the PPC [1]. (ii) Outward shift of the PPC along the grain axis only; the cloth intercept stays where it is [1]. (iii) A movement along the existing PPC, towards more grain and less cloth [1]. (iv) Outward shift of the PPC for both goods [1]. (v) Economic growth is a rise in an economy’s capacity to produce [1]; an outward shift means more of both goods (or more of at least one without less of the other) can be made [1]. [6] Examiner insight: Part (iii) is a movement, not a shift.

8. (a) (125 - 100) / 100 x 100 = 25% [1]. (b) The grain intercept moves out from 100 to 125 [1]; the cloth intercept stays at 120, so the curve swings outwards on one axis rather than shifting evenly [1]. (c) Any one developed consequence: more grain can be made at every cloth level [1], so living standards can rise through more food or exports [1]; the benefit is mostly to grain growers and consumers rather than cloth producers [1]. [6] Examiner insight: Follow each statement with its effect on people.

9. (a) A [1]. (b) B [1]. (c) B [1]. [3] Examiner insight: Test each wrong option against the definition.

10. (a) North: 30 / 10 x 0.5 = 1.5% a year [1]. South: 10 / 10 x 0.5 = 0.5% a year [1]. (b) North: 120 x 1.015^10 = 139.3 thousand metres [1]. South: 120 x 1.005^10 = 126.1 thousand metres [1]. (c) Resources used for capital goods cannot make goods people consume now [1]; North gives up current consumer goods, for example grain or cloth, to gain later growth [1]. (d) Better if people will wait: North’s maximum is 13.1 thousand metres higher after 10 years [1]. But living standards are lower now, so it depends on the weight given to the present [1]. [8] Examiner insight: Support a judgement with a reason on each side.

11. (a) 90 / 45 = 2 units of food [1]. (b) 90 - 2 x 30 = 30 units of food [1]. (c) New opportunity cost of housing is 120 / 45, so food = 120 x (1 - 30 / 45) [1] = 40 units [1]. (d) 120 / 45 = 2.67 units of food per unit of housing [1]. (e) Only the food intercept moves, so the slope changes [1]. [6] Examiner insight: Show the ratio you use, not just a final figure.

12. Credit up to four developed points [4] and a judgement [2]:

• On the PPC means full and efficient use of present resources, but not that the mix of goods matches what people want.
• The economy can still grow: an outward shift needs investment in capital or training, which being on the curve does not provide.
• Judgement: the claim is right about current resource use but wrong that nothing can improve, since growth, the mix of output and fairness remain open. [6] Examiner insight: A list of limits with no verdict leaves evaluation unfinished.

Where marks are usually lost

• Drawing a straight line or leaving axes unlabelled.
• Calling a point inside or outside without comparing it with the curve at the same output of one good.
• Treating a movement along the curve as growth.
• Stating opportunity cost in money, or forgetting “per unit”.
• Shifting the whole curve when only one good has improved.
• Evaluation with no judgement.

Frequently asked questions

What does a point inside a production possibility curve show? A point inside the PPC shows that resources are not fully used, for example because of unemployment. To call a point inside or outside, compare it with the curve at the same output of one good.

Is a movement along a PPC the same as economic growth? No. A movement along the curve shows the economy switching resources from one good to the other. Economic growth is shown by an outward shift of the curve.

How should opportunity cost be stated in a PPC question? State it in units of the other good given up, per unit of the good gained, not in money. Forgetting “per unit” is a common error.

Which Cambridge O Level 2281 section covers PPC diagrams? Section 1.4 of the Cambridge O Level Economics 2281 syllabus covers the definition, drawing and interpretation of a PPC, points under, on and beyond it, movements along it and shifts of it.

Next steps

• Re-read the revision notes and study guide.
• Visit the course hub and checklist.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge O Level Economics 2281 syllabus for examination in 2026, section 1.4 Production possibility curve (PPC) diagrams, published by Cambridge University Press & Assessment (Cambridge International Education).