Question 1 (10 marks)

a. Joan, who has been a university student for a year, has just started a new job. She realises that if she works more hours there will be an impact on her grades.  The following is Joan’s production possibility table for work and her average grades:

From the figures in the table above:

i. Plot the production possibility curve for Joan. (1 mark)

ii. Explain the concept of increasing opportunity cost using the production possibility table and curve plotted in Q1ai above.  (2 mark)

iii. If the opportunity cost of Joan increasing her grade was constant regardless of how many hours she worked, what would be the shape of her production possibility curve?  Draw this graph.  Which of the two shapes would be more likely, and why? (2 marks)

iv. What would be happening if Joan’s combination of her grades and hours of work per week were below (inside) the curve as plotted above in Q1ai? (1 mark)

v. How could Joan push her combination of her grades and hours of work per week past (outside) the current curve? (2 mark)

b. Joan has returned to work after a year of unemployment and has found a high-paying job with an international hotel firm. Does this mean that Jane will no longer experience the problem of ‘scarcity’? Explain the reasons for your answer.

     (2 marks)

Question 2 (10 marks) 1048984

a. Continual research into solar power generation has seen a breakthrough in the manufacturing of solar-powered motor vehicles which will substantially reduce their costs of production. Use demand and supply curves to illustrate what will happen to:

i)    the equilibrium price and quantity of solar powered motor vehicles.

ii)   the equilibrium price and quantity of conventional motor vehicles.

       (parts i and ii are worth 2.5 marks each)

b. In an attempt to support the solar-powered motor vehicle industry the government sets a minimum price for solar-powered vehicles that is below the market price. Do you think this is a good idea? Explain your decision using graphs.      

(5 marks)                                            

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