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Factors of Production and the PPC Diagram: Question 5

Syllabus 1.4

Multiple choice 1 mark

The diagram (described here in words) shows a country's production possibility curve (PPC) for producing bicycles and tents. The country is currently producing at a point on the curve. It then moves along the same, unchanged PPC to produce more bicycles and fewer tents, with the total quantity and quality of its resources unchanged.

What does this movement show?

Choose an answer to check it, then compare with the worked solution below.
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Worked solution

Step 1: Identify what has and has not changed

The stem tells us that the country’s total quantity and quality of resources is unchanged. Nothing has increased or decreased the resources available. All that has changed is how those existing resources are allocated: more are now devoted to producing bicycles, and fewer to producing tents.

Step 2: Recognise this as a movement along the PPC

Because total resources are unchanged and the country stays on the same curve, this is a movement along the PPC, not a shift of it. Moving along a fixed PPC always involves giving something up: to produce more bicycles with the same fixed resources, the country must produce fewer tents.

Step 3: Name what this trade-off represents

The tents given up in order to produce more bicycles are exactly the opportunity cost of that decision, the best alternative forgone.

Step 4: Rule out the other options

  • Option A describes an outward shift of the whole PPC, which needs more or better resources (economic growth), not what is described here.
  • Option C is directly contradicted by the stem, which states resources are unchanged.
  • Option D describes resources moving from being under-used (inside the curve) to fully used (on the curve), but the country is already on the curve both before and after the movement described.

Final answer

Moving along an unchanged PPC to produce more bicycles and fewer tents shows the opportunity cost of that choice, the tents given up, so the correct answer is option B.