OCR GCSE Economics: Introduction to Economics — 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 available free from your board.

Related: Introduction to Economics revision notes

Each real question paper opens with a bank of multiple-choice questions before moving to short case-study-based questions. Section A below practises the multiple-choice format; Section B is built around two short case studies. Questions 5 and 9 use the production possibility curve as a teaching aid for opportunity cost and resource allocation – the specification does not name this diagram, and the straight-line curve used here (a constant opportunity cost) is a simplification of the more realistic bowed-outward curve.

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Section A — Multiple choice

1. Which of the following is a factor of production? [1] A. Money B. Profit C. Labour D. Price

2. In a planned (command) economy, resources are mainly allocated by: [1] A. the price mechanism B. private firms competing for customers C. the state D. individual consumers

3. Opportunity cost is best defined as: [1] A. the total cost of a choice B. the value of the next best alternative given up C. the price paid for a good D. the cost of producing a good

4. Which function of money allows the value of different goods to be compared? [1] A. Medium of exchange B. Store of value C. Unit of account D. Standard for deferred payment

5. A point inside a production possibility curve indicates: [1] A. full and efficient use of resources B. unemployed or inefficiently used resources C. an unattainable combination of output D. economic growth

Section B — Case studies

Case study 1: A government must decide how to allocate its budget between healthcare and defence spending.

6. Explain the basic economic problem, and use the concept of opportunity cost to explain the choice facing the government in Case study 1. [4]

7. Explain the three functions of the price mechanism in a market economy. [6]

8. Explain two advantages and one disadvantage of specialisation and the division of labour. [6]

Case study 2: A country can produce 80 units of food or 40 units of machinery, or any combination between, using all its resources. It currently produces 50 units of food and 15 units of machinery.

9. (a) Calculate the opportunity cost, in food, of producing one extra unit of machinery. [2] (b) State whether the point described in Case study 2 is on, inside or outside the production possibility curve, showing your working, and explain what this means. [3]

10. State the four factors of production and the reward each earns. Explain why “capital”, as an economist uses the term, is often confused with money. [5]

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Answers

Section A: 1. C 2. C 3. B 4. C 5. B

6. The basic economic problem is that resources are scarce while human wants are unlimited, so choices must be made [1]. Opportunity cost is the value of the next best alternative given up when a choice is made [1]. A government choosing to increase healthcare spending must give up the defence spending that money could otherwise have funded [1] — the opportunity cost of more healthcare is the defence provision sacrificed [1].

7. Signalling — prices convey information to buyers and sellers about relative scarcity; a rising price signals a shortage [1] [1]. Incentive — a higher price encourages producers to supply more because it is more profitable, and encourages consumers to economise [1] [1]. Rationing — when a good is scarce, the rising price allocates it to those willing and able to pay most, so demand is brought into line with the available supply [1] [1].

8. Advantages: workers become more skilled at a single task through repetition, so output per worker rises [1] [1]. Specialisation makes it worthwhile to use specialised machinery, which raises productivity and lowers unit costs, allowing lower prices [1] [1]. Disadvantage: repeating one task becomes monotonous, reducing motivation and raising absenteeism and staff turnover, which can offset the productivity gain [1] [1]. (Also accept: workers become dependent on one narrow skill, so if that job disappears they face structural unemployment and are hard to re-employ.)

9. (a) Giving up all 80 food gains 40 machinery, so 2 food = 1 machinery: the opportunity cost of 1 extra machinery is 2 food [1] [1]. (b) At 50 food, the curve allows (80 − 50) ÷ 2 = 15 machinery [1]. The economy produces exactly 15, so it is on the curve [1], meaning it is productively efficient — all resources are fully and efficiently employed, and more of one good can only be produced by giving up some of the other [1].

10. Land — natural resources — earns rent [1]; labour — human effort — earns wages [1]; capital — man-made aids to production such as machinery and factories — earns interest [1]; enterprise — risk-taking and organising the other three — earns profit [1]. Capital is confused with money because both are needed to acquire machinery, but in economics capital refers to the productive equipment itself, not the money used to buy it — money is a means of exchange, not a factor of production [1].

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Where marks are usually lost

• Treating a multiple-choice question as if partial reasoning earns partial credit — only the selected option is marked.
• Listing the price mechanism’s functions without explaining each.
• Giving advantages of specialisation without linking them to productivity.
• Confusing economic capital (productive equipment) with money — money is only a means of exchange, not a factor of production itself.
• Not showing the opportunity-cost ratio explicitly when checking whether a production point lies on, inside or outside the PPC.