Use the following to answer questions 5-7 Figure: Strawberries and Submarines Mi

Question

Use the following to answer questions 5-7 Figure: Strawberries and Submarines Millions of tons of strawberries (per month) 800 550 Submarines (per month) 5. (Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. Suppose the economy is operating at point G. This implies that: A) the economy can move to a point such as Conly if it improves its technology B) the economy has unemployment and/or inefficiently allocates resources D) people in this economy don't really like strawberries or submarines. 6. (Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. As the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine: A) falls. B) rises. C) remains unchanged. D) doubles. 7. (Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. Suppose the economy now operates at point C. Moving to point E would require that the economy: A) achieve full employment and an efficient allocation of resources. B) eliminate its production of strawberries C) reduce its production of submarines. D) improve its technology or increase its quantities of factors of production.

Explanation / Answer

5.

An economy at point G implies that the economy is below production possibility frontier and is producing with insufficient resources and unemployment exists.

the correct option is (b)

6.

As the economy moves from point A to point D along the production possibility frontier, the opportunity cost starts decreasing because in order to produce one good the other good has to be substituted.

The correct option is (a)

7.

A movement from point C to E along the production frontier requires to eliminate the production of strawberries as at point E only one good is produced so the producer can specialize in producing one good using same resources as assigned at point C.

the correct option is (c)

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