.1 The problem of scarcity in economics: n style A exists only in economies which rely on the market mechanism. B could be eliminated if we force prices to fall. C means that there are shortages of some goods. D exists because there are insufficient resources to satisfy human wants. [1%] .2 An economy can produce either Good X or Good Y. The opportunity cost of producing an extra unit of Good X is: i style A the value of the capital and labour used to produce Good X. B the number of units of Good Y that must be given up in order to produce an extra unit of Good X. C the cost of producing Good X less the cost of producing Good Y. the amount of Good X that would have been produced in the following year. [1)4] .3 Define the two branches of economics: macroeconomics and microeconomics. [2] n style .4 Describe and discuss the scope of economics in terms of the problems of the allocation of scarce n style resources. [5] .5 Explain the differences between a command economy and a free market economy. [10] n styleA country produces Good X and Good Y only. The table gives maximum production possibilities for Goods X and Y. Point Units of Good X Units of Good Y A 0 15 B P 13 C 2 10 D 6 E 4 0 (i) Draw a production possibility curve marking points A, B, C, D and E. (Wi) Calculate the opportunity cost of increasing the output of Good X from 2 to 3 units. Explain how and why the opportunity cost of producing higher levels of output of Good X changes. (iv) Describe the situation that must exist if the economy produces a combination of 2 units of Good X and 8 units of Good Y