Cambridge International as and a level Economics Ebook

36
Cambridge International AS Level Economics

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Exam-style questions
1
a
Using a production possibility curve, explain 
how opportunity cost can be used to show the 
trade-off s involved. 
[8]
b
Discuss some of the problems when a planned 
economy makes the transition to a market 
economy. 
[12]
2
a
Using examples, explain the characteristics of 
public goods and merit goods. 
[8]
b
Discuss why in many countries certain types 
of education and health care are provided as 
private goods and not as merit goods. 
[12]
3
a
Explain what you understand by ‘information 
failure’. 
[5]
b
Explain why it is necessary to know what this 
means when classifying goods as merit or 
demerit goods. 
[10]
In this chapter it has been shown that:
■
All economies face the so-called 
fundamental economic problem of limited 
resources and unlimited wants.
■
Choice is necessary in order to decide what 
to produce, how to produce and for whom 
to produce.
■
Factors of production (land, labour, capital 
and enterprise) are essential for the 
production process.
■
Specialisation allows more goods and 
services to be produced.
■
The true cost of choices we have to make is 
known as opportunity cost.
■
A production possibility curve is a 
representation of what can be produced in 
an economy and the trade-off s involved in 
making choices.
■
There are various types of economic system 
for the allocation of resources; the mixed 
economy is typical.
■
There are problems of transition when 
former centrally planned economics move 
to mixed economies.
■
Money includes a range of cash and non-
cash items; it has four functions that are 
essential for the smooth operation of any 
economy.
■
Economists classify goods in various ways: 
private goods, free goods, public goods, 
merit goods, demerit goods.