Reason Based Questions - Introduction and Central Problem of an Economy Notes | Study Crash Course of Micro Economics -Class 12 - Commerce

Commerce: Reason Based Questions - Introduction and Central Problem of an Economy Notes | Study Crash Course of Micro Economics -Class 12 - Commerce

The document Reason Based Questions - Introduction and Central Problem of an Economy Notes | Study Crash Course of Micro Economics -Class 12 - Commerce is a part of the Commerce Course Crash Course of Micro Economics -Class 12.
All you need of Commerce at this link: Commerce

Reason Based Question’s

(Q1) Central problems are seen only in developing countries like India and Pakistan and not in developed countries like USA and UK.

Ans: False because central problem is seen in all economies because every economy faces problem of scarcity of resources.

(Q2) Can two production possibilities curves ever cut each other ?

Ans: Yes.

(Q3) If the economy is operating inside the production possibility frontier, it indicates that the economy is saving resources for growth and expansion in future.

Ans: False  It indicates that there is underutilization or inefficient use of resources.

(Q4) Economy can never operate outside the production possibility frontier with the given resources and technology.

Ans: True, as all points outside production possibility frontier are unattainable.

(Q5) The opportunity cost of a machine which can produce only one product is high.

Ans: False; the opportunity cost of such machinery will be zero as it has no alternative use.

(Q6)  Economising of resources refer to saving resources for future use.

Ans: False ; It refers to making optimum possible use of available resources.

(Q7) Microeconomics and macroeconomics have same degree of aggregation.

Ans: False

(Q8)  Positive statements are the statements of truth.

Ans: False , Positive statements are not the statements of truth.  Positive statements may be true or false.  One can verify these statements as true or false.

(Q9)  Economic problem arises only because of unlimited wants.

Ans: False ;  due to the following reasons Unlimited wants,Scarce Means, Alternative Uses

(Q10)  Problem of choice is the basic economic problem.

Ans: True, Problem of choice is the basic economic problem.  It is the problem of allocating scarce resources to alternative uses. 

(Q11) Production possibility curve may sometimes be convex to the origin.

Ans: False , PPC is always concave to the origin.

(Q12) PPC is affected when resource are inefficiently employed in an economy.

Ans: False, PPC is not affected (or will not shift to the right or left.  If is a situation when the concerned  economy is NOT operating on the production possibility curve, but is somewhere within the production possibility curve. 

(Q13) If production possibility curve shifts to the right, should it be parallel to the old one?

Ans: Not necessarily, because slope of PPC indicates marginal opportunity cost, which may be different at different levels of output.

(Q14) “Microeconomics is a more important branch of economics as compared to macroeconomics.

Ans: False

(Q15)  Underutilisation and unutilisation of resources will shift the Production Possibility Frontier to the left.  Defend or refute.

Ans: The given statement is refuted.  It does not decrease the capacity of economy to produce.  So, there will be no shift of Production Possibility Frontier (PPF).  However, economy will operate at some point inside the PPF.

(Q16) Economic problem and scarcity of resources are not related to each other.

Ans: False; Economic problem arises because of scarcity of resources. Hence, the two are related to each other.

(Q17) A free medicine given to the patients in hospital is not a scarce commodity.

Ans: False ;  Although medicine is available at zero price, yet it is a scarce commodity. Because, it involves some opportunity cost.

(Q18 ) Problem of resource allocation is automatically solved in a free economy (capitalist economy).

 Ans: True. In a free economy, problem of resources allocation finds its solution through the market forces of supply and demand.

(Q19) Choice between ‘production for the poor’ and ‘production for the rich’ refers to the   problem of ‘for whom to produce’.

Ans: False,  It is problem relating to choice of users of goods and services.

(Q20) In a free economy, decision relating ‘for whom to produce’ enhances the gulf between rich and poor.

Ans: True 

(Q21) Slope of PPC shows the ratio between the loss of output and gain of output.

Ans: True.

(Q22) Opportunity cost is an avoidable cost.

Ans: False. Opportunity cost is the cost of a factor in its best alternative use. Accordingly, it is the minimum cost of a factor, and therefore, unavoidable.

(Q23) All attainable combinations point to the same level of output

Ans: False.  Attainable combinations of output may broadly be split as : 

(i) attainable combinations on the PPC, and 

(ii) attainable combinations within the PPC. 

(Q24) Giving reasons, state which of the following statements is true or false :

(a) An economy always manages to meet all the needs of the people living in the country.

(b) In an economy when we talk about ‘scarcity’, we refer to short supply of money.

(c) PPF) is always represented as a downward sloping curve.

(d) How does Honda Motor Car Co. fix the price of its cars is studied in macro-economics.
Ans: (a) False     (b) False      (c) True      (d) False.

(Q25) Giving reasons, state if the following statements are true or false :

(a) In a  market economy, government does not impose any taxes.

(b) In a centrally controlled economy, all the means of production are state-owned.

(c) The USA is a mixed capitalistic economy, as is India.
Ans: (a) False     (b) True      (c) True

(Q26) Giving reasons, state if the following statements are true or false :

(a) Because of destruction caused by war, a country’s PPF will shift to the right.

(b) A job guarantee scheme will lead to a rightward to a rightward shift of the PPF.

(c) If a PPF shifts to the right, the new PPF will be parallel to the original.
Ans: (a) False     (b) False     (c) False

(Q27)  State which of the following statements are true/false, citing suitable reasons in support of your choice:

(a) FDI inflows have no direct impact on the PPC of the host country.

(b) Two PPC’s can intersect each other.

(c) Education for all will have no effect on India’s PPC.

(d) Only scarce goods attract price.
Ans:  (a) False     (b) True      (c) False      (d) True

(Q28) Giving reasons, state which of the following are normative statements :

(a) A rise in the price of a commodity results in a fall in quantity demanded of commodity.

(b) A good monsoon results in good agricultural output.

(c) Government should raise taxes on industries that cause pollution.

(d) Households should be advised to cut back their consumption expenditure.
Ans:  [ (i) and (ii) are only positive statements. These state a simple cause-and-effect          relationships. ] [ (iii) and (iv) are normative statements. They have an element of judgement. They suggest a course of action that may be undertaken to reach the desired end. 

(Q29) Give reasons for the following :

(i) Every economy has to make the decision relating to what to produce.

(ii) Problem of choice arises because available resources have alternative uses.

(Q30) Give reasons for the following :

(i) A Production Possibility Frontier is always a downward sloping concave curve.

(ii) An efficient economy would always produce a combination of goods that lies on the given Production Possibility Frontier.

(iii) Growth of an economy is represented in the form of a rightward shift of a Production Possibility Frontier.

The document Reason Based Questions - Introduction and Central Problem of an Economy Notes | Study Crash Course of Micro Economics -Class 12 - Commerce is a part of the Commerce Course Crash Course of Micro Economics -Class 12.
All you need of Commerce at this link: Commerce

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