6. 

2003 APW MACROECONOMICS FREE-RESPONSE QUESTIONS (Form B) g5. 40 30 Ashna Luna 10 40 MACHINES 2. Using equal amounts of resources, the countries of Ashna and Luna can each produce any combination of food and machines described by their production possibilities curves above. (:1) Which country has an absolute advantage in the production of machines? Explain. (b) Which country has an absolute advantage in the production of food? Explain. (c) Which country has a comparative advantage in the production of machines? Explain. ((1) With trade between these two countries, which country will import food? Explain. (e) Give an example of terms of trade acceptable to both countries. Free Response Question Two (AP Microeconomics Exam 2003, #3) Curve for Atlantis Production Possiblities Curve for Xanadu L. Q 10 40 TRACTDRS 20 3. Assume that two countries, Atlantis and Xanadu. have equal amounts of resources. Atlantis can produce 30 cars or 10 tractors or any combination. as shown by the line MN in the gure above. Xanadu can produce 20 cars or 40 tractors or any combination. as shown by the line PQ in the gure above. (a) Which country has an absolute advantage in the production of tractors? Explain how you determined your answer. (b) Which country has a comparative advantage in the production of cars? Using the concept of opportunity cost, explain how you determined your answer. (c) If the two countries specialize and trade with each other, which country will import cars? Explain why