Tackle the Test: Free-Response Questions

23

  1. Question

    Refer to the graph below. Assume that the country is producing at point C.

    image
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    Rubric for FRQ 1 (6 points)

    1 point: Yes

    1 point: The PPC is concave (bowed outward), so with each additional unit of butter produced, the opportunity cost in terms of gun production (indicated by the slope of the line) increases. Likewise, as more guns are produced, the opportunity cost in terms of butter increases.

    1 point: B

    1 point: The country would choose an efficient point with more (but not all) military goods with which to fight the war. Point A would be an unlikely choice because at that point there is no production of any social goods, some of which are needed to maintain a minimal standard of living.

    1 point: E

    1 point: A recession, which causes unemployment, is represented by a point below the PPC.

  2. Question

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    Assume that an economy can choose between producing food and producing shelter at a constant opportunity cost. Draw a correctly labeled production possibilities curve for the economy. On your graph: