๐คAP Microeconomics
FRQ 1 โ Long
Unit 1: Basic Economic Concepts
Practice FRQ 1 of 19
1. Assume that the countries of Zymos and Xylos produce Microchips and Solar Panels using equal amounts of resources. The table below shows the maximum annual production of each good for each country if all resources are fully employed.
- Assume that the production possibilities curves for both countries are linear.
- Both countries trade with each other.
Table 1: Maximum Annual Production
| Country | Microchips (units) | Solar Panels (units) |
|---|---|---|
| Zymos | 100 | 50 |
| Xylos | 40 | 80 |
A. Draw a correctly labeled graph of the production possibilities curve for Zymos, with Microchips on the vertical axis and Solar Panels on the horizontal axis. Show each of the following.
i. The numerical values of the vertical and horizontal intercepts
ii. A point labeled U representing an inefficient use of resources
iii. A point labeled E representing an efficient use of resources
B. Calculate the opportunity cost of producing one unit of Solar Panels in Zymos. Show your work.
C.
i. Which country has the comparative advantage in the production of Solar Panels?
ii. Explain your answer to part (C)(i) using numbers.
D. Identify a specific number of Microchips that could be traded for one unit of Solar Panels that would be mutually beneficial to both Zymos and Xylos.
E.
i. On your graph in part A, show the new production possibilities curve for Zymos.
ii. Will the opportunity cost of producing one unit of Solar Panels in Zymos increase, decrease, or remain the same? Explain.
F. Assume that Xylos is currently producing 20 units of Microchips and 40 units of Solar Panels. Is Xylos producing at an efficient level? Explain using numbers.
