From the chapter Economy and Its Central Problems, some of the important questions are covered in this question paper. The questions are covers from the book back and the previous year questions.

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Questions:

Multiple Choice Question

10 x 1 = 10

PPC will be a straight line when MOC will be:

(a)

Falling

(b)

Rising

(c)

Constant

(d)

Zero

The central problem of how to produce is a problem of choice regarding:

(a)

Distribution

(b)

Technique of production

(c)

Quantity to be produced

(d)

Commodities to be produced

Due to a cyclone in a state, map,y of its production units got destroyed. Where will its production potential lie:

(a)

On the PPF

(b)

Pushed upwards

(c)

Pushed to a point inside the PPF

(d)

None

The reason behind a rightward or outward shift of PPC could be:

(a)

Growth of resources

(b)

Technological advancement

(c)

Either (a) or (b) or both

(d)

Fall in resources or obsolete technology

Many people have died and large number factories destroyed because of a severe earthquake in a country. How will it affect the country's PPC?

(a)

Its PPC will shift to the right

(b)

Its PPC will shift to the left

(c)

Economy will operate inside PPC

(d)

PPC will not be affected with this change

Macroeconomics deals with

(a)

The behavior of firms

(b)

The behaviour of electronics industry

(c)

The activities of individual units

(d)

Economic aggregates

Economics is:

(a)

The study of stocks and bond market

(b)

Mainly the study of business firms

(c)

The problem of choice under scarcity

(d)

The study of management decisions

The usual shape of Production Possibility Curve is .......... towards the origin.

(a)

convex

(b)

concave

(c)

straight line

(d)

rectangular

Which one of the following is not the feature of socialist economy?

(a)

Social welfare

(b)

Freedom of enterprise

(c)

Public ownership

(d)

Planning mechanism

10.

Which of the following is related to microeconomics?

(a)

Inflation in the economy

(b)

Problem of unemployment

(c)

National Income

(d)

Income from the railways

Generic 3

6 x 3 = 18

11.

Which of the following statements are true or false?
(i) An economy always produces on but not inside the Production Possibility Curve.
(ii) Massive unemployment shifts the Production Possibility Curve to the left.
(iii) An economy cannot operate on any point outside the Production Possibility Curve.

12.

Why does technological advancement or growth of resources shift the Production Possibility Curve to the right?

13.

Water resources are limited in our country, how can we economise the water resources, so that it would not become a future problem for us? Give any two suggestions.

14.

State reasons why does an economic problem arise.

15.

Explain the difference between a planned economy and a market economy.

16.

With the help of suitable example, explain the problem of 'for whom to produce'.

Fill up / 1 Marks

6 x 1 = 6

17.

What does a movement from a point within the production possibility frontier to a point on the frontier indicate?

18.

How is an economic problem a choice making activity?

19.

Why is a production possibility curve concave? Explain

20.

What does a point below production possibility curve indicate?

21.

Give one reason for a rightward shift of the production possibility curve.

22.

What factors lead to a rightward shift of the PPC?

Generic 6

2 x 6 = 12

23.

Given the production possibilities curve for rifles and automobiles:
(a) Suppose improvement occurs in the technology of producing rifles and not in the production of automobiles. Draw the new PPC.
(b) Now,assume that a technological advance occurs in producing automobiles and not in producing rifles. Draw the new PPC.
(c) Finally, draw a PPC which reflects technological improvements in the production of both products.

24.

How does an economic problem arise? Is it true to say if resources had not been limited, there would not have been any economic problem?

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Answers Key:

Multiple Choice Question

10 x 1 = 10

(b)
Technique of production

(b)
Its PPC will shift to the left

(d)
Economic aggregates

concave

Freedom of enterprise

10.

Income from the railways (as it refers to an individual industry).

Generic 3

6 x 3 = 18

11.

(i) False When there is underutilisation or inefficient utilisation of resources, the economy will produce at a point inside the Production Possibility Curve.
(ii) False Massive unemployment does not cause a shift in the Production Possibility Curve but causes the economy to operate at a point inside the Production Possibility Curve.
(iii) True A Production Possibility Curve is drawn by assuming given resources and technology constant. With these assumptions, the economy can operate at a point on Production Possibility Curve but not beyond it.

12.

Technological advancement shifts Production Possibility Curve to the right, because better technology means more can be produced with the given resources. Growth of resources also shifts Production Possibility Curve to the right, as with the given state of technology, more resources means more production.

13.

The two suggestion which can be used for economising the water resources are:
(i) Rainwater should be preserved for future usage.
(ii) Wastage of water should be avoided so that economical use of water can be made.

14.

The main reason for an economic problem are:
(i) Scarce resources.
(ii) Wants are unlimited and recurring in nature.
(iii) Alternative uses of resources.

15.

Difference between planned and market economy

Basic	Planned economy	Marker economy
Meaning	It is that economy in which course of economic activities is decided by some central authority or by the government.	It is that economy in which economic activities are fully dependent on the role of market forces.
Right to produces	Producers are not free to produce. Only a central authority decides the full variety of goods and services that people can consume.	Producers are free to produce the highly demanded goods in order to maximise their profits.
Aim	Social welfare is the prime consideration.	Self-interest is the prime consideration.

16.

It is the problem which is concerned with the distribution of income among all factors of production like wages to the labour, rent to the land, interest to the capital and profit to the entrepreneur. e.g. in a country like India where disparity of income is high, the government employs its resources for production of those goods which are socially desirable like railways, rather than on the production of high-end cars like Ferrari.

Fill up / 1 Marks

6 x 1 = 6

17.

()
It indicates movement from the point of under utilisation of resources towards the point of full utilisation/employment of resources.

18.

()
An economic problem is a choice making activity because it requires a decision to make best use of available scarce resources among their alternate uses.

19.

()
PPC looks concave to origin because of increasing marginal opportunity cost or marginal rate of transformation. The increasing marginal opportunity cost means that for producing an additional unit of a good, the sacrifice of units of the other good goes on increasing. This behaviour is based on the assumption that all resources are not equally efficient in the production of all goods. Resources are withdrawn from production in decreasing order of efficiency due to which the cost increases.

20.

()
A point below PPC indicates 'underutilisation' and 'inefficient use' of resources available in the economy.

21.

()
Factors which lead to a rightward shift of PPC are: (i) Growth of resources, and (ii) Improvement in technology. It implies an increase in productive capacity, which in turn means that the economy can produce more of both goods.

22.

()
Factors which lead to a rightward shift of PPC are: (i) Growth of resources, and (ii) Improvement in technology. It implies an increase in productive capacity, which in turn means that the economy can produce more of both goods.

Generic 6

2 x 6 = 12

23.

24.

An economic problem mainly arises on account of the scarcity of the resources available to satisfy the unlimited human wants. To a large extent, if the resources were not limited, the economic problem would not have arisen, because every want could be satisfied, i.e., everyone could have everything. But this indeed is not true as the reality is that relative scarcity will continue to prevail and the other related problem -of 'choice' would always exist. One is always confronted with the problem of what to choose and what to give up, i.e., sacrifice. Thus, scarcity, being a relative term, will always exist and so would an economic problem.