The rightward shifting of the curve (new curve) shows the growth of resources. If the society is able to increase the resources due to the process of growth, new curve GH is formed. The PPC or production possibility curve/ frontier is a presumptive depiction of the different conceivable combinations of two goods that can be produced within the given available resource. Free Online MCQ Questions of Class -11 Microeconomics Chapter 2 – Central Problems of an Economy with Answers. Disclaimer Copyright, Share Your Knowledge (iii) Main tools of microeconomics are demand and supply of the particular commodity/ factor whereas tools of macroeconomics are aggregate demand and aggregate supply of the whole economy. Now the increasing marginal ‘opportunity cost’ implies that the PPC is concave to the origin. This article consists of MCQs related to the topic “Central Problems of an Economy”. Giving reason comment on the shape of Production Possibilities curve based on thefollowing schedule: Production Possibility Curve (PPC) will be concave to the origin because of the increasingopportunity cost. And this causes the concave shape of PPC.In the above graph, AE represents the PPC for capital goods and consumer goods. The problem for whom to produce refers to selection of the category of people who will ultimately consume the goods. PPC is concave to the origin. The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. MCQ Questions for Class 12 Economics with Answers were prepared based on the latest exam pattern. A en n . Three main phases of PPC: 1. To explain the concavity of PPC we have to understand the meaning of opportunity cost and marginal opportunity cost too. 6. The problem of ‘what to produce and in what quantity: This curve also reflects the problem of ‘what to produce’. (ii) Functional Distribution: It involves deciding the share of different factors of production in the total national product of the country. Check the below NCERT MCQ Questions for Class 12 Economics Chapter 1 Introduction to Micro Economics with Answers Pdf free download. As the government starts employment generation schemes, the unemployed resources get utilized. If you're seeing this message, it means we're having trouble loading external resources on our website. Download the PDF Question Papers Free for off line practice and view the Solutions online. In that case, there will be no production of ‘X’. The rate of this sacrifice is called Marginal Opportunity Cost (MOC). (iv)    Microeconomics analyses how equilibrium of a consumer, a producer or an industry is attained but macroeconomics is concerned with determination of economy's equilibrium level of income, employment and output. The diagram or graph explains how many units of goods a company can produce if all the resources are utilized produc… 6. The graph of f which is called a parabola will be concave up if a is positive and concave down if a is negative. Share Your PDF File 3) f is strictly monotonic on I if it is either increasing or decreasing on I . Concave down on since is negative. The distribution of the final goods and services is equivalent to the distribution of National Income (or National Product) among the factors of production such as land, labour, capital and entrepreneur. Redistribution of technology . There are other secondary functions that are essential contributors to the efficient performance of production, planning, and control. constant. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. This article consists of MCQ related to the topic “Central Problems of an Economy”. A. TOS4. Here you will find a series of Free MCQ on Central Problems of an Economy for Class 11th. The graph is concave down on the interval because is negative. (2015) states that the PPC condition implies the (strong) central condition. It is, therefore, necessary that we must make the best possible utilization of resources to maximize output. Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost. In business, the Production Possibility Curve (PPC) is applied to evaluate the performance of a manufacturing system when two commodities are manufactured together. Distinction between Microeconomics and Macroeconomics. Resources are limited and these can be put to alternative uses. The MOC of a particular good is the amount of sacrificed of the other good for per unit increase in the production of the good. 2 Definition Let f be defined on an interval I, (open, closed or neither), we say that: 1) f is increasing on I if for every x 1, x 2 in I x 1 < x 2 implies f(x 1) < f(x 2). Guiding Principle of ‘For whom to Produce’: Ensure that urgent wants of each productive factor are fulfilled to the maximum possible extent. Suppose the initial production point is B, where 1 unit of capital goods and 48 units of consumer goods are produced. According to Furguson, “The alternative or opportunity cost of producing one unit of commodity ‘x’ is the amount of commodity ‘y’ that must be sacrificed in order to use resources to produce ‘x’ rather than ‘y’- Hence, opportunity cost means opportunity lost. Table 2 is showing the marginal opportunity cost of wheat. ... A movement along a PPC implies. The PPC is concave because the possibilities between two products (Guns and butter) are not a linear exchange. Both these factors will lead to better and efficient utilisation ofexisting resources of an economy. The curve is the frontier line beyond which existing resources cannot cross. Why is a production possibilities curve concave? Erven et al. No free lunch: C(y, w) > 0, w > 0, y > 0. Therefore, opportunity cost of a factor is also called the transfer earning of the factor or the cost for next best alternative. (a) Rs 60 (b) Rs 30 (c) Rs 40 (d) Rs 20. (b) Concave & downward sloping (c) Convex & upward sloping (d) Concave & upward rising. It is possible to produce more of both products. Functions of PPC. Share Your PPT File, What to Produce, How to Produce and For Whom to Produce. 5. On the other hand, at point D, the opportunity cost of producing one additional unit of capital good is 9 units of consumer goods. The remainder of the proof is a drastic simpli cation of the proof of Theorem 7 of Mehta and Williamson If the country uses all of its resources for the production of only Y, then the maximum possible production of Y will be OPO. What is the difference between microeconomics and macroeconomics? This is because it shows the maximum gain of two products used in production. 11. The management utilizes this diagram to plan the perfect proportion of goods to produce to reduce the wastage and cost while maximizing profits. It is because the increase in production of one unit of good is accompanied by the sacrifice of units of the other good. Q1 What does concavity of PPC imply a Increasing slope b Decreasing slope c Constant slope d None of these - Economics - Introduction To produce one additional unit of capital good, 4 units of consumer good must be sacrificed (point c). 2) f is decreasing on I if for every x 1, x 2 in I x 1 < x 2 implies f(x 1) > f(x 2). Follow up or control phase . Therefore the shape of ppc becomes concave to the origin. Before publishing your Articles on this site, please read the following pages: 1. Concave ppc shows increasing opportunity cost Increasing opp cost is created when the production factors used within the production process are homogenous or highly job specific..this means tht a combination of productn factors used to produce a certain product cannot be efficiently used to produce another product. What will likely be the impact of large scale outflow of foreign capital on ProductionPossibilities curve of the economy and why? Quiz-PPC Posted by Amir on December 1st, 2014 | Updated on: December 1, 2014 This quiz is all about production possibility curves. G is the inefficient combination, which is inside the PPC. © U-shaped average cost curve is based on: (a) Law of increasing cost This movement is being depicted in the below graph with the help of thearrow from point P. The large scale outflow of foreign capital will lead to a decrease in the availability ofresources, thereby shifting the Production Possibility Curve (PPC) from right to left that isfrom AB to CD as shown in the following diagram. Resources are limited and these can be put to alternative uses. You cannot stop making a unit of butter, and replace it with an equal unit of guns. C-D in the diagram above.The PPF is thus concave whe viewed from below. B. The units of guns are sacrificed each time to … This is because no resource is equally efficient in the production of all goods. These MCQs are collected from various test, past papers, and various sources. (v)    Microeconomics deals with determination of prices of individual goods and individual factors of production but macroeconomics deals with general price level and nation's incomes. Hence, we can say that leftward shift ofPPC results in fall in output and resources. PPC is concave shaped – PPC is concave shaped because more and more units of one commodity are sacrificed to gain an additional unit of another commodity i.e. To explain the concavity of PPC we have to understand the meaning of opportunity cost and marginal opportunity cost too. But in that use, production of y will be zero. That is, as we move down along the PPC, the opportunity cost increases. 3,000 and wheat worth Rs. That is, as we move down alongthe PPC, the opportunity cost increases. The mission of 'Clean India Mission' (Swachh Bharat Mission) will lead tobetter waste-management technique. Due to this reason, the country cannot choose any such combination like ‘H’ which lies beyond the PPC. 1. A. Concave down on since is negative. Specifically V.1a implies that toproduce zero output, any input vector in Rn + will do, including the zero vector with zero costs. We can draw the PPC on the basis of above schedule. This is because inorder to increase the production of one good by 1 unit more and more units of the other good have to be sacrificed since the resources are limited and are not equally efficient in the production of … opportunity cost. Action phase 3. It is also known as transformation curve. Scarcity implies that a production possibilities curve is downward sloping; the law of increasing opportunity cost implies that it will be bowed out, or concave, in shape. Accordingly, the economy will move higher and closerto initial PPC. And this causes the concave shape of PPC. This confirms the concave shape of PPC. Production possibility curve is a graphical representation of the maximal mix of outputsthat an economy can achieve using its existing resources to full extent and in the mostefficient way. From Figure, it can be noticed that PPC is concave to origin. It is also known as production possibility frontier (PPF). PPF will display . This quiz has around twelve questions of the same topic; choose the correct answer. 4,000, then a rational producer will forgo the production of rice for the sake of wheat. PPC MCQs and Solved MCQs of Pakistan Penal Code 1860 given and they are very often required when someone is preparing for Judiciary examination or similar other papers. Thus, as we move down the PPC from point C to point D, the opportunity cost increases. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. we have collected all the data and merged them into one file you will be able to download the … Briefly put (i) Microeconomics is the study of individual economic units like a consumer, a firm (producer) whereas macroeconomics is the study of economy as a whole and its aggregates like national income, total employment, general price level. Explain. A firm’s average fixed cost is Rs 20 at 6 units of output what will it be at 4 units of output? Solution to Question 1: 1. Because resources were already being fully utilized. Assume further that the community’s indifference curve (CIC) is convex from origin. Central problem of an economy arise, because: On the basis of above schedule we can plot al the coordinates of A, B, C, D, E and F, which show the various combination of two goods, wheat and machines. The sign of f "(x) is the same as the sign of a. It is, therefore, necessary that we must make the best possible utilization of resources to maximize output. Movement from the point within the enclosed area to any point on the curve AF shows fuller utilization of resources at present. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. b. 2, we can show other variants of economic problems also. PPF will exhibit . This is shown in Table 2. PPC is concave to the origin. We have provided Introduction to Micro Economics Class 12 Economics MCQs Questions with Answers to help students understand the … Hey friends, Today in this blog we are going to give you the List of Most Repeated PPSC MCQs with answers For jobs in 2020, These are the MCQs that are mostly repeated in Punjab Public Service Commission tests.. Suppose there are two goods, guns and butter. Proof (of Theorem 1) First, from Lemma 1, the convexity of F together with -exp-concavity implies that (P;`; F ) satis es the -central condition. Central problem of an economy arise, because: It depicts the economic problem, i.e., what is to be produced. Privacy Policy3. PPC is concave shaped due to increasing MRT i.e. Delhi - 110058. Consequently it leads to healthy India and increasedindividual productivity. Hence, economic value is reflected in terms of increased output and income. We have discussed so far that for production of extra unit of one commodity, we have to sacrifice some units of another commodity. https://www.zigya.com/share/RUNFTjEyMTEwOTU3. Questions #21-22 are based on a concave (bowed out) production possibility curve (PPC) with environmental quality (EQ) in the horizontal axis and goods and services (G) in the vertical axis. This is shown in Fig. ; if it produces OXO of X and OYO of Y, then it indicates inefficient utilisation of resources. Similarly, if the country uses all of its resources for the production of ‘X’ then the maximum possible production of ‘X’ will be OP1O. Prof. Paul A. Samuelson used the concept of the production possibility curve to explain the economic problem of a society. This test is Rated positive by 86% students preparing for Commerce.This MCQ test is related to Commerce syllabus, prepared by Commerce teachers. 2.4.6. Here the point ‘N’ shows OY1 amount of natural rubber (Y) and OXo amount of Paddy (X). The economic problem of "For whom to Produce" basically focuses on the distribution mix of the final goods and services produced. This shows the limited availability of natural resources. PPC is concave shaped because of increasing marginal utility, i.e., more and more units of one commodity is sacrificed to gain an additional unit of another commodity. Marginal Rate of Transformation (MRT). Content Guidelines 2. The bowed-out curve of Figure 2.5 “The Combined Production Possibilities Curve for Alpine Sports” becomes smoother as we include more production facilities. The shape of PPC is concave to the origin. Ltd. Download books and chapters from book store. In general, for increasing the production of one commodity, we will have to make a sacrifice of another commodity, In order to grab the opportunity to produce more units of another commodity, we will have to make a sacrifice of the existing commodity. These three phases as mentioned above make up the main body of functions of PPC. 21. If new resources are available or if the level of technology is improved through better method of production and better facilities, then the total PPC will shift upward or rightward. For instance, if we want to produce 2 lakh tons of wheat, we will have to sacrifice 2 thousand machines and so on. opportunity cost w. hereas a . That is, as we move down along the PPC, the opportunity cost increases. 232, Block C-3, Janakpuri, New Delhi, 2020 Zigya Technology Labs Pvt. Thus, point ‘N’ shows comparatively higher amount of y in contrast to point T. If shows that the country wants to produce more of X, it has to sacrifice the production of Y. State its economic value in the context of production possibilities frontier. The unattainable combination is F as it is outside the PPC. Resources are perfectly substitutable between the production of the two goods B. Therefore shifting of resources from present commodity to the production any alternative commodity can earn more value. Increasing MOC/MRT implies (a) Concavity of PPC (b) Consecity of PPC (c) Straight line PPC (d) None of the above. (ii) Central problems of microeconomics is price determination and allocation of resources but that of macroeconomics is determination of level of income and employment. Substitute any number from the interval into the second derivative and evaluate to determine the concavity. As we move down along the PPC, to produce each additional unit of GoodX, more and more units of Good Y needs to be sacrificed. The Law of Increasing Opportunity Cost that is shown in a Production Possibilities Curve is concave to the origin. Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost. convex. Here you will find a series of Free MCQs on Central Problems of an Economy for Class 11th. a. If the country chooses the combination of point M, i.e. What will be the impact of recently launched 'Clean India Mission' (Swachh BharatMission) on the Production Possibilities curve of the economy and why?Or. Thus at point c, the opportunity cost of one additional capital good is 4 units of consumer goods. Explain the central problem 'for whom to produce.'. Planning phase 2. The problem can be categorised under two main heads:(i) Personal Distribution: It means how national income of an economy is distributed among different groups of people. Welcome to EconomicsDiscussion.net! Concavity of PPC implies: a. increasing slope b. decreasing slope c. constant slope d. none of these 6. Combination D. Likewise, point ‘T’ shows OYO amount of Y and OX1 amount of X. Unemployment is reduced due to the measures taken by the government. Multiple choice questions So, the possibility within a given economy to produce will … Production Possibility Curve (PPC) is the locus (the path of a moving point) of various combinations of two commodities which can be produced with given level of resources and technology. Production Possibility Curve (PPC) is a graphical representation of all possible combinations of two goods or services that can be produced in an economy with given level of resources and technology. Share Your Word File In a situation of full employment the economy would move to a point on the PPC. Which of the following is true if the production possibilities curve is a curved line concave to the origin? On the contrary, if the country moves on the point ‘N’ and ‘T’, i.e., on the PPC, then it shows optimum utilisation of resources or full the PPC shows underutilisation of resources. 3,000 the cost of producing rice. As initially, the production in the economy is below its potential due to unemployment, this suggests that the economy is operating at a point below the Production Possibility curve (PPC). PPC is concave to the origin because of increasing Marginal opportunity cost. For getting one lakh additional tons of wheat we have to sacrifice some units of machines. 1. Thus, a problem of choice arises. 4. to produce every additional unit of a commodity more and more units of another commodity are sacrificed. Free Online MCQs Questions of Class -11 Microeconomics Chapter 2 – Central Problems of an Economy with Answers. falling. When an economy is operating on the PPC, it indicates: a. potential output> actual output b. potential output= actual output c.potential output