🤑AP Microeconomics
1. Zephyria and Lumina are two countries that produce Solar Panels and Electric Vehicles using equal amounts of resources. The table below shows the maximum annual production for each country if they use all their resources for one good. Assume constant opportunity costs for both countries.
Resources are fully employed.
Costs are constant (linear PPC).
Table 1. Maximum Annual Production
Country | Solar Panels | Electric Vehicles |
|---|---|---|
Zephyria | 100 | 50 |
Lumina | 80 | 20 |
Using the data in Table 1, draw a correctly labeled graph of the production possibilities curve for Zephyria with Solar Panels on the horizontal axis and Electric Vehicles on the vertical axis. Show each of the following.
The numerical values of the horizontal and vertical intercepts
A point labeled I that represents an inefficient use of resources
A point labeled E that represents an efficient use of resources
A point labeled U that is currently unattainable
Calculate the opportunity cost of producing one Electric Vehicle in Zephyria. Show your work.
Use the data in Table 1 to answer the following.
Which country has the comparative advantage in producing Solar Panels? Explain.
Which country has the absolute advantage in producing Electric Vehicles? Explain.
Identify a specific number of Solar Panels that could be traded for one Electric Vehicle that would be mutually beneficial for both Zephyria and Lumina.
Assume that Zephyria develops a new technology that improves the efficiency of producing Solar Panels only.
On your graph in part A, show the effect of the new technology on Zephyria's production possibilities curve.
Does the opportunity cost of producing one Electric Vehicle in Zephyria increase, decrease, or remain the same? Explain.
Required Graph Drawing
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