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Free-Response Questions
-
l. The following is a production possibility table for the production of capital goods
V
and
consumer goods
Combination
capitalgoods I
Consumer
goods
f
I{V
f
30 n
68
120
Zl
(a) Demonstate these various combinations of consumer and capital goods graphically.
o) What do thi various points on your graph.represent?
(c) How would you demonstrate that this economy is experiencing unemploymsnt
on
your graph?
(d) Assume that a te,chnological improvement occurs in ppoducing capital goods.
Draw the new PPC that would result oO your graph for part (a) and taUef it ppC_D.
(e) Now assume that a technological breakthrough occdrs that positively impacts
the
production of all.goods. Draw the new ppC that would result on your graph for
part (a) and label it PPC-E.
Demonstrate on yotu 3traph the effect of a change in tastes and preferences that
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