๐คAP Microeconomics
๐คAP Microeconomics
FRQ 1 โ Long
Unit 1: Basic Economic Concepts
Practice FRQ 1 of 191/19
1. Zephyria and Borealis are two countries that produce solar panels and wind turbines using equal amounts of resources. Both countries have constant opportunity costs of production.
- The table below shows the maximum daily output for each country if it uses all its resources to produce a single good.
Table 1: Maximum Daily Production
| Country | Solar Panels (units) | Wind Turbines (units) |
|---|---|---|
| Zephyria | 80 | 40 |
| Borealis | 60 | 60 |
A. Draw a correctly labeled graph of the production possibilities curve for Zephyria and show each of the following.
i. The numerical values of the horizontal and vertical intercepts
ii. A point labeled U representing a combination of goods that is inefficient
iii. A linear curve representing constant opportunity costs
B.
Use the data in Table 1 to answer the following.
i. Calculate the opportunity cost of producing one wind turbine in Zephyria. Show your work.
ii. Calculate the opportunity cost of producing one wind turbine in Borealis. Show your work.
C. Based on your calculations in part B, answer the following.
i. Which country has the comparative advantage in producing wind turbines? Explain.
ii. Which country has the absolute advantage in producing solar panels? Explain.
D. Identify a specific number of solar panels that could be traded for one wind turbine that would be mutually beneficial for both Zephyria and Borealis.
E.
Assume that Zephyria adopts a new technology that doubles the productivity of its resources used to produce solar panels but has no effect on the productivity of wind turbines.
i. On your graph in part A, draw the new production possibilities curve for Zephyria.
ii. Will the opportunity cost of producing one wind turbine in Zephyria increase, decrease, or remain the same? Explain.
