Economics (AS & A Level) · Oct / Nov 2021 · Paper 11 · Question 4

The diagram shows the production possibility curves of two economies, Northland (Y1–X1) and Southland (Y2–X2). [diagram: production possibility curves with axes food and drink, points Y1, Y2, X1, X2, O, P, R] Both economies specialise based on the theory of comparative advantage and trade with one another. What can be concluded from the diagram?

1. ABoth economies face increasing opportunity costs.
2. BPoint P represents the final equilibrium outcome.
3. CPoint R shows the total possible combined production of food and drink.
4. DAll points on Y1–X2 are only attainable through trade.

As printed in the paper