OCR A Level Economics: Opportunity cost, the PPF, specialisation and trade (H460) – 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 Opportunity cost and Specialisation and trade in Component 1, Microeconomics, of the OCR A Level Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021. Teaching is in the study guide and the revision notes. Course pages: the hub and checklist. All contexts and figures are invented.

Questions

1. Opportunity cost and trade-off.

(a) Define opportunity cost. [2] (b) Distinguish a trade-off from an opportunity cost. [2]

2. A self-employed designer (illustrative) has annual revenue of £64,000 and explicit costs of £21,000. She could earn £38,000 as an employee and could rent out her own office for £9,000.

(a) Calculate her accounting profit. [1] (b) Calculate her economic profit, showing your working. [2] (c) Explain what the answer to (b) tells her. [2]

3. Country C (illustrative) can produce these combinations of manufactured goods and services.

Point	Manufactured goods	Services
P	0	60
Q	20	56
R	40	48
S	60	32
T	80	0

(a) Calculate the opportunity cost of one unit of manufactured goods when moving from Q to R. [2] (b) State and explain how opportunity cost changes along the frontier. [2] (c) Explain whether the combination of 40 manufactured goods and 40 services is attainable and efficient. [2] (d) Explain why 60 manufactured goods with 50 services cannot be produced. [2]

4. Country D (illustrative) has a PPC/F for capital goods and consumer goods.

(a) Explain two factors that could shift the PPC/F outward. [4] (b) Explain one factor that could shift it inward. [2]

5. An economy (illustrative) has a straight-line PPC/F: up to 80 units of X or 50 units of Y. New technology raises the maximum output of Y by 30%. The maximum of X is unchanged.

(a) Calculate the new maximum of Y. [1] (b) Calculate the opportunity cost of one unit of Y, in units of X, before and after (2 decimal places). [2] (c) Describe how the frontier changes. [2] (d) Explain why the opportunity cost of Y falls. [1]

6. Explain how a PPC/F can illustrate scarcity, choice, opportunity cost and productive efficiency. [8]

7. A bicycle workshop (illustrative) has 10 workers paid £80 a day each. Each builds whole bicycles at 1.2 a day. After the work is divided into stations, total output is 21 bicycles a day.

(a) Calculate output before the change. [1] (b) Calculate the percentage rise in output. [2] (c) Calculate labour cost per bicycle before and after (to the nearest penny). [2] (d) Calculate the percentage fall in labour cost per bicycle (1 decimal place). [1]

8. Evaluate the role of the division of labour in addressing the problem of scarcity. [10]

9. Tomas and Ilse (illustrative) each have 10 hours. Tomas bakes 4 loaves or makes 1 jug per hour. Ilse bakes 1 loaf or makes 4 jugs per hour. Without specialising, each spends 5 hours on each task.

(a) Calculate the output of each person and the total of each good. [2] (b) Calculate the total of each good if each specialises for the whole 10 hours. [1] (c) They swap 15 loaves for 15 jugs. Show that both are better off than in (a). [2] (d) Explain how the example shows that specialisation encourages exchange. [2]

10. A village market (illustrative) trades 15 types of goods by barter.

(a) Calculate the number of exchange rates under barter and the number of prices if money is introduced. [2] (b) Explain the “double coincidence of wants”, using an example. [3] (c) Explain how two functions of money overcome problems of barter. [4]

11. A government (illustrative) must choose between spending a fixed sum on a new rail line or on flood defences. Evaluate the usefulness of the concept of opportunity cost to the government in making this decision. [10]

Answers

1. (a) The value [1] of the next best alternative given up [1]. [2] (b) A trade-off is the situation in which more of one thing means accepting less of another [1]. Opportunity cost is the value of the particular best alternative lost [1]. [2] Examiner insight: Put “next best” in the definition; “everything you give up” describes a list.

2. (a) 64,000 − 21,000 = £43,000 [1]. [1] (b) Opportunity costs are 38,000 + 9,000 = 47,000 [1]. Economic profit = 43,000 − 47,000 = −£4,000 [1]. [2] (c) She would be £4,000 a year better off as an employee who rents out the office [1]. The costs are real even though no cash is paid out [1]. [2] Examiner insight: Show both implicit costs in the working so the method is visible.

3. (a) Services fall from 56 to 48, a loss of 8 [1]. 8 ÷ 20 = 0.4 services per unit of manufactured goods [1]. [2] (b) It rises [1] from 0.2 (P to Q) to 1.6 (S to T), because resources suit the two uses unequally [1]. [2] (c) It is attainable because it lies inside the frontier [1]. It is inefficient because 48 services could be made with 40 manufactured goods, so resources are idle or misused [1]. [2] (d) At 60 manufactured goods the maximum services are 32 [1]. The combination lies beyond the frontier because resources are limited: scarcity [1]. [2] Examiner insight: In (a) divide by the units gained, not by the starting level. Quote the figures from the table when explaining (b).

4. (a) Any two, each with a link to capacity. Education and training raise labour quality [1], so more output can be made from the same workers [1]. Investment adds capital [1], which raises the maximum output of goods [1]. [4] (b) A flood or war destroys capital and land [1], so maximum output falls and the curve shifts inward [1]. [2] Examiner insight: Say what changes in the economy’s ability to produce; a cause alone is only a label.

5. (a) 50 × 1.3 = 65 [1]. [1] (b) Before: 80 ÷ 50 = 1.60 X [1]. After: 80 ÷ 65 = 1.23 X [1]. [2] (c) The frontier pivots outward on the Y axis [1], with the X intercept unchanged at 80 [1]. [2] (d) The same resources now make more Y, so fewer units of X are given up per unit of Y [1]. [1] Examiner insight: Describe a one-sided pivot, not a parallel shift, and say which intercept moves.

6. Scarcity: the frontier is the limit of what resources can produce [1], and points beyond it are unattainable [1]. Choice: any point on the frontier can be selected [1], and choosing one means rejecting the others [1]. Opportunity cost: the slope shows how much of one good is lost per unit gained of the other [1], shown by a move between two points [1]. Productive efficiency: points on the frontier are efficient, as no more of one good can be made without less of the other [1]. A point inside is inefficient because resources are unemployed or underused [1]. [8] Examiner insight: Cover all four ideas, each tied to the diagram, for example with a named unattainable point.

7. (a) 10 × 1.2 = 12 [1]. [1] (b) (21 − 12) ÷ 12 [1] × 100 = 75% [1]. [2] (c) Daily wage bill is 10 × 80 = £800. Before: 800 ÷ 12 = £66.67 [1]. After: 800 ÷ 21 = £38.10 [1]. [2] (d) (66.67 − 38.10) ÷ 66.67 × 100 = 42.9% [1]. [1] Examiner insight: Show the division from the wage bill, and carry unrounded values into the percentage.

8. Scarcity is limited resources against unlimited wants, so raising output from given resources eases it [1]. Division of labour raises output per worker through practice [1] and less time lost switching tasks [1]. Lower unit cost allows lower prices, so more wants can be met [1], and in effect the economy’s PPC/F moves outward [1]. However, repetitive work can lower motivation and quality [1]. Workers who learn one task may lose wider skills, making it harder to change jobs [1]. Reliance on one stage or product is risky if demand falls, and gains need a market large enough for the extra output [1]. Overall it eases scarcity most where tasks are simple and the market is large, but motivation and dependence limit the gains [2]. [10] Examiner insight: Weigh the gains against the limits and decide which dominates. Two lists with no judgement leave the evaluation unfinished.

9. (a) Tomas: 20 loaves and 5 jugs. Ilse: 5 loaves and 20 jugs [1]. Totals: 25 loaves and 25 jugs [1]. [2] (b) Tomas 10 × 4 = 40 loaves; Ilse 10 × 4 = 40 jugs, so 40 loaves and 40 jugs [1]. [1] (c) Tomas has 25 loaves and 15 jugs, against 20 and 5 [1]. Ilse has 15 loaves and 25 jugs, against 5 and 20 [1]. [2] (d) Each specialist has a surplus of one good and none of the other [1], so to consume both they must trade [1]. [2] Examiner insight: In (c) compare each person’s before and after for both goods; a total alone does not show each gains.

10. (a) Barter: 15 × 14 ÷ 2 = 105 exchange rates [1]. With money: 15 prices [1]. [2] (b) Each party must want what the other offers [1]: a potter who wants shoes needs a cobbler who wants pots [1]. Without a match, trade fails or searching wastes time, which limits specialisation [1]. [3] (c) Any two. Medium of exchange [1]: sellers accept money and spend it elsewhere, so no double coincidence is needed [1]. Unit of account [1]: every good has one price, so no need for 105 exchange rates [1]. (Store of value and standard of deferred payment are also acceptable.) [4] Examiner insight: Link each function to the barter problem it solves; a bare list of functions gains little.

11. Opportunity cost is the value of the next best alternative forgone [1]. Choosing the rail line means flood defences are not built, so the cost is the protection lost [1]. This forces the government to compare options rather than judge the rail line alone [1]. It applies to any fixed budget [1]. However, the benefits of each project are hard to value in money, such as lives protected against time saved [1]. Future benefits are uncertain, so the value of the forgone option is uncertain too [1]. The next best alternative may be unclear where several options are close [1], and governments lack full information [1]. Overall it is useful because it forces the cost of the choice into view, but it cannot give a precise answer when benefits are non-monetary and uncertain [2]. [10] Examiner insight: Apply the points to rail and flood defence, and state a view on how far the concept helps.

Where marks are usually lost

• Listing several alternatives as the cost when only the best forgone one counts.
• Calling a point inside the frontier unattainable, or a point on it inefficient.
• Showing more employment as a shift of the PPC/F.
• Saying the division of labour raises output with no reason.
• Giving the gains and limits of specialisation without weighing them.

Next steps

• Re-read the study guide on any weak area.
• Use the revision notes for a final check.
• Visit the OCR Economics hub and the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OCR, A Level in Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021, Component 1 content, areas of study Scarcity and choice (Opportunity cost; Specialisation and trade).