The management utilizes this diagram to plan the perfect proportion of goods to produce to reduce the wastage and cost while maximizing profits. (vi)    Microeconomics explains how resources are allocated and how total production is distributed among cooperating factors of production but macroeconomics explains how productive capacity and national income of a country increase overtime. Resources are limited and these can be put to alternative uses. Table 2 is showing the marginal opportunity cost 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. For getting one lakh additional tons of wheat we have to sacrifice some units of machines. We have discussed so far that for production of extra unit of one commodity, we have to sacrifice some units of another commodity. So, the possibility within a given economy to produce will … Likewise, point ‘T’ shows OYO amount of Y and OX1 amount of X. The Law of Increasing Opportunity Cost that is shown in a Production Possibilities Curve is concave to the origin. The sign of f "(x) is the same as the sign of a. Both these factors will lead to better and efficient utilisation ofexisting resources of an economy. 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. 11. output. Prof. Paul A. Samuelson used the concept of the production possibility curve to explain the economic problem of a society. Welcome to EconomicsDiscussion.net! we have collected all the data and merged them into one file you will be able to download the … 6. Thus, the opportunity cost (OC) of wheat will be Rs. The graph of f which is called a parabola will be concave up if a is positive and concave down if a is negative. Similarly, if the country uses all of its resources for the production of ‘X’ then the maximum possible production of ‘X’ will be OP1O. Concavity of PPC implies: a. increasing slope b. decreasing slope c. constant slope d. none of these 6. No free lunch: C(y, w) > 0, w > 0, y > 0. Download the PDF Question Papers Free for off line practice and view the Solutions online. G is the inefficient combination, which is inside the PPC. The problem of ‘what to produce and in what quantity: This curve also reflects the problem of ‘what to produce’. The problem for whom to produce refers to selection of the category of people who will ultimately consume the goods. b. Reason of Concave Shape of PPC: It is downward sloping because to produce more of one we have to sacrifice a few units of another. 6. Here the point ‘N’ shows OY1 amount of natural rubber (Y) and OXo amount of Paddy (X). Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost. Resources are limited and these can be put to alternative uses. Marginal Rate of Transformation (MRT). You cannot stop making a unit of butter, and replace it with an equal unit of guns. Follow up or control phase . As the government starts employment generation schemes, the unemployed resources get utilized. If the country chooses the combination of point M, i.e. PPF will exhibit . Because resources were already being fully utilized. Hence, we can say that leftward shift ofPPC results in fall in output and resources. 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. Due to this reason, the country cannot choose any such combination like ‘H’ which lies beyond the PPC. We have provided Introduction to Micro Economics Class 12 Economics MCQs Questions with Answers to help students understand the … A production possibilities curve that is concave to the origin (bowed out) implies that as more of a good is produced, the opportunity cost increases A simultaneous increase in both the demand for and the supply of a good in a market will lead to which of the following changes in the equilibrium price and quantity of the good? It is also known as production possibility frontier (PPF). constant. MCQ Questions for Class 12 Economics with Answers were prepared based on the latest exam pattern. Increasing MOC/MRT implies (a) Concavity of PPC (b) Consecity of PPC (c) Straight line PPC (d) None of the above. This is shown in Fig. The economic problem of "For whom to Produce" basically focuses on the distribution mix of the final goods and services produced. 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. C-D in the diagram above.The PPF is thus concave whe viewed from below. What will be the impact of recently launched 'Clean India Mission' (Swachh BharatMission) on the Production Possibilities curve of the economy and why?Or. B. For instance, if we want to produce 2 lakh tons of wheat, we will have to sacrifice 2 thousand machines and so on. Guiding Principle of ‘For whom to Produce’: Ensure that urgent wants of each productive factor are fulfilled to the maximum possible extent. 1. That is, as we move down along the PPC, the opportunity cost increases. TOS4. Suppose there are two goods, guns and butter. Below is a production possibility curve for clean environment and medical services. In a situation of full employment the economy would move to a point on the PPC. The shape of PPC is concave to the origin. Thus, a problem of choice arises. (ii) Central problems of microeconomics is price determination and allocation of resources but that of macroeconomics is determination of level of income and employment. Therefore shifting of resources from present commodity to the production any alternative commodity can earn more value. If the society is able to increase the resources due to the process of growth, new curve GH is formed. 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. This is because it shows the maximum gain of two products used in production. The mission of 'Clean India Mission' (Swachh Bharat Mission) will lead tobetter waste-management technique. Consequently it leads to healthy India and increasedindividual productivity. PPF will display . Check the below NCERT MCQ Questions for Class 12 Economics Chapter 1 Introduction to Micro Economics with Answers Pdf free download. It implies that the resources are underutilised. opportunity cost. Central problem of an economy arise, because: This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. 3) f is strictly monotonic on I if it is either increasing or decreasing on I . The diagram or graph explains how many units of goods a company can produce if all the resources are utilized produc… As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. Combination D. 4,000, then a rational producer will forgo the production of rice for the sake of wheat. A. Hence, economic value is reflected in terms of increased output and income. 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. 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. Share Your Word File 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. 2020 Zigya Technology Labs Pvt. And this causes the concave shape of PPC. The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. (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. 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. Which of the following is true if the production possibilities curve is a curved line concave to the origin? © It is possible to produce more of both products. 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. This confirms the concave shape of PPC. Redistribution of technology . 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. Here you will find a series of Free MCQ on Central Problems of an Economy for Class 11th. Why is a production possibilities curve concave? The units of guns are sacrificed each time to … Since resources are scarce in every economy, no society can satisfy all the wants of its people. It is also known as transformation curve. (2015) states that the PPC condition implies the (strong) central condition. opportunity cost w. hereas a . 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. A. But in that use, production of y will be zero. Accordingly, the economy will move higher and closerto initial PPC. 3,000 the cost of producing rice. 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. 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. Q1 What does concavity of PPC imply a Increasing slope b Decreasing slope c Constant slope d None of these - Economics - Introduction It is because the increase in production of one unit of good is accompanied by the sacrifice of units of the other good. (b) Concave & downward sloping (c) Convex & upward sloping (d) Concave & upward rising. Therefore, opportunity cost of a factor is also called the transfer earning of the factor or the cost for next best alternative. PPC is concave to the origin. In that case, there will be no production of ‘X’. The PPC is concave because the possibilities between two products (Guns and butter) are not a linear exchange. 3,000 and wheat worth Rs. a. Planning phase 2. Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost. 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.. Privacy Policy3. This article consists of MCQ related to the topic “Central Problems of an Economy”. 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. Specifically V.1a implies that toproduce zero output, any input vector in Rn + will do, including the zero vector with zero costs. Delhi - 110058. 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). If the country uses all of its resources for the production of only Y, then the maximum possible production of Y will be OPO. (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. PPC is concave to the origin because of increasing Marginal opportunity cost. https://www.zigya.com/share/RUNFTjEyMTEwOTU3. Share Your PDF File This is shown in Table 2. Free Online MCQs Questions of Class -11 Microeconomics Chapter 2 – Central Problems of an Economy with Answers. It includes both explicit and implicit cost. As is shown by P1P11 curve in Fig-2, here the country can produce both ‘X’ and ‘V commodities in higher units. falling. Three main phases of PPC: 1. This contains 25 Multiple Choice Questions for Commerce Test: Introduction To Economics - 4 (mcq) to study with solutions a complete question bank. Similarly, with the help of a general PPC as shown below in Fig. PPC is concave to the origin. To produce one additional unit of capital good, 4 units of consumer good must be sacrificed (point c). 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. to produce every additional unit of a commodity more and more units of another commodity are sacrificed. 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). The bowed-out curve of Figure 2.5 “The Combined Production Possibilities Curve for Alpine Sports” becomes smoother as we include more production facilities. 1. 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. ... A movement along a PPC implies. To explain the concavity of PPC we have to understand the meaning of opportunity cost and marginal opportunity cost too. 4. What will likely be the impact of large scale outflow of foreign capital on ProductionPossibilities curve of the economy and why? Substitute any number from the interval into the second derivative and evaluate to determine the concavity. For instance, if one acre of land produces rice worth Rs. In business, the Production Possibility Curve (PPC) is applied to evaluate the performance of a manufacturing system when two commodities are manufactured together. Share Your PPT File, What to Produce, How to Produce and For Whom to Produce. Free Online MCQ Questions of Class -11 Microeconomics Chapter 2 – Central Problems of an Economy with Answers. State its economic value in the context of production possibilities frontier. 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 … Our mission is to provide an online platform to help students to discuss anything and everything about Economics. We first calculate the first and second derivative of function f f '(x) = 2 a x + b f "(x) = 2 a 2. 5. 2.4.6. A firm’s average fixed cost is Rs 20 at 6 units of output what will it be at 4 units of output? That is, as we move down along the PPC, the opportunity cost increases. What is the difference between microeconomics and macroeconomics? Functions of PPC. Quiz-PPC Posted by Amir on December 1st, 2014 | Updated on: December 1, 2014 This quiz is all about production possibility curves. Resources are perfectly substitutable between the production of the two goods B. Movement from the point within the enclosed area to any point on the curve AF shows fuller utilization of resources at present. The graph is concave down on the interval because is negative. Before publishing your Articles on this site, please read the following pages: 1. 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. And this causes the concave shape of PPC.In the above graph, AE represents the PPC for capital goods and consumer goods. This quiz has around twelve questions of the same topic; choose the correct answer. It is, therefore, necessary that we must make the best possible utilization of resources to maximize output. On the other hand, at point D, the opportunity cost of producing one additional unit of capital good is 9 units of consumer goods. convex. There are other secondary functions that are essential contributors to the efficient performance of production, planning, and control. Unemployment is reduced due to the measures taken by the government. Disclaimer Copyright, Share Your Knowledge This test is Rated positive by 86% students preparing for Commerce.This MCQ test is related to Commerce syllabus, prepared by Commerce teachers. Here you will find a series of Free MCQs on Central Problems of an Economy for Class 11th. The unattainable combination is F as it is outside the PPC. Suppose the initial production point is B, where 1 unit of capital goods and 48 units of consumer goods are produced. Erven et al. C.4.2. If you're seeing this message, it means we're having trouble loading external resources on our website. 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. 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Called marginal opportunity cost ( MOC ) 48 units of goods to produce will … Solution to Question 1 1... ’ s average fixed cost is Rs 20 at 6 units of output what will likely be impact..., planning, and replace it with an equal unit of capital goods and services produced a general as! 12 Economics with Answers is negative of MCQs related to the production any alternative commodity can earn more value in... Cost increases product of the category of people who will ultimately consume the goods, papers. Acre of land produces rice worth Rs ( B ) Rs 40 ( d ) 20... Every economy, no society can satisfy all the wants of its people ) is concave the... If one acre of land produces rice worth Rs whe viewed from.... In every economy, no society can satisfy all the wants of its people is B, where 1 of! Like ‘ H ’ which lies beyond the PPC be produced I if it is outside the.... Employment the economy would move to a point on the curve AF shows fuller utilization of resources at present PPC... Transfer earning of the curve ( PPC ) is the frontier line beyond which existing resources can not making. Increase the resources are perfectly substitutable between the production of rice for the of... ‘ T ’ shows OY1 amount of X resources get utilized and evaluate to determine the concavity PPC...: Introduction to Economics - 5 | 25 Questions MCQ test has Questions of Class -11 Microeconomics 2! Essential contributors to the origin c ) Convex & upward sloping ( c ) Convex & sloping. Beyond the PPC Rs 20 efficient performance of production, planning, and control 'Clean mission! Curve is the same as the sign of f `` ( X ) draw the PPC, the opportunity of! H ’ which lies beyond the PPC, the country chooses the combination of M! ( strong ) Central condition of output, and replace it with an equal unit of capital good is by... Utilisation of resources to maximize output also called the transfer earning of the final goods and services.!