CBSE Book Class 12 Economics Production Possibilities Curve

Question. Which of these constitutes "Capital"?
(a) Land
(b) Water
(c) Air
(d) Plant and Machinery
Answer: D

Question. Which of these constitutes does not constitute "Capital"?
(a) Factory Building
(b) Plant and Machinery
(c) Forests
(d) Dams and Canals
Answer: C

Question. As a Factor of Production, "Tools and Accessories" constitute —
(a) Land
(b) Labour
(c) Capital
(d) Enterprise
Answer: C

Question. Income arising out of "Capital" is a concept.
(a) Stock
(b) Fl ow
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. As a Factor of Production, "Capital" is a _________ means of Production.
(a) Original
(b) Primary
(c) Produced
(d) Monetary
Answer: C

Question."Capital" is considered as a "produced means of production". This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) None of the above
Answer: A

Question. To enable Employees enjoy a good standard of living and maintain work—life balance, is a
(a) Social Objective
(b) Human Objective
(c) National Objective
(d) Economic Objective
Answer: B

Question. .....is that part of wealth of an individual or community, which is used for further production of wealth, or which yields an income.
(a) Land
(b) Enterprise
(c) Capital
(d) Labour 
Answer: C

Question. All Capital is Wealth, but all Wealth is not Capital. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) None of the above
Answer: A

Question. Capital * Wealth. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) None of the above
Answer: C

Question. As a Factor of Production, "Capital" is —
(a) A free gift of nature
(b) Produced by man alone
(c) Produced by man working with nature
(d) Not relevant at all.
Answer: C

Question. As a Factor of Production, "Capital" is —
(a) Mobi le
(b) Produced means of production
(c) Produced by man working with nature
(d) All of the above
Answer: D

Question. As a Factor of Production, Capital has relative mobility in the sense.
(a) Geographical
(b) Utility
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. In Economics, ....... refers to any economic activity, which is directed towards satisfaction of human wants.
(a) Product ion
(b) Distribution
(c) Consumption
(d) Economics
Answer: A

Question. Labour may be classified as —
(a) Skilled
(b) Semi—Skilled
(c) Unskilled
(d) All of the above
Answer: D

Question. For the purpose of Capital Formation —
(a) Current consumption is to be sacrificed to a certain extent
(b) Current income should be saved
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Supply of Labour and Wage Rates may become inversely related at —
(a) Very high wage rates
(b) Very low wage rates
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Which of the following statements is not true about Labour Economies?
(a) Larger Scale of Production enables the division of labour
(b) Division of Labour is not profitable at small scale of production
(c) Division of Labour results in imporving worker's skills
(d) Division of Labour is impossible in Firms with large scale production
Answer: D

Question. Larger production of goods would lead to higher production in future.
(a) Consumer Goods.
(c) Agricultural Goods.
(d) Public Goods.
(d) All of the above
Answer: B

Question. Lesser production of would lead to lesser production in future
(a) Public Goods
(b) Consumer Goods
(c) Capital Goods
(d) Agriculture Goods
Answer: C

Question. Capital Formation involves —
(a) Creation of Savings
(b) Mobilisation of Savings
(c) Investment of Savings into Real Capital
(d) All of the above
Answer: D

Question. Labour Power depends upon —
(a) Physical strength
(b) Education and skills
(c) Motivation to work
(d) All of the above
Answer: D

Question. Production Activity involves creation of Utility. Such Utility can be created as —
(a) Personal Utility
(b) Form Utility
(c) Time Utility
(d) All of the above
Answer: D

Question. For the purpose of Capital Formation, which of the following create "Savings" in an economy?
(a) Individuals or Households
(b) Business Enterprises
(c) Government
(d) All of the above
Answer: D

Question. For the purpose of Capital Formation, which of the following create maximum "Savings" in an economy?
(a) Individuals or Households
(b) Business Enterprises
(c) None of these
Answer: A

Question. Level of Savings depends upon —
(a) Ability to Save
(b) Will ingness to Save
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Ability to Save depends upon —
(a) Average level of income
(b) Distribution of national income.
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. If the whole of the current capacity is used to produce only Consumer Goods —
(a) Production of Consumer Goods in the future will be affected
(b) Economy cannot grow in future
(c) Production Possibility Curve (PPC) cannot shift outside
(d) All of the above
Answer: D

Question. Accounting Profits is also called —
(a) Book Profit
(b) Pure Profit
(c) Super Profit
(d) Super Normal Profit
Answer: A

Question. Supply of Labour and Wage Rates are always directly related. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) None of the above
Answer: B

Question. If there is an increase .......... increases.
(a) Propensity to consume
(b) Propensity to save
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Willingness to Save depends upon —
(a) An individual's concern about his future
(b) Social setup in which the individual lives.
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. If Willingness to Save is higher, the level of ..... will be higher.
(a) Voluntary Savings
(b) Compulsory Savings
(c) Forced Savings
(d) None of the above
Answer: A

Question. If Willingness to Save is less, the level of ............will be higher.
(a) Government regulated Savings
(b) Compulsory Savings
(c) Forced Savings
(d) All of the above
Answer: D

Question. save by way of Retained Earnings, i.e. Undistributed Profits.
(a) Individuals or Households
(b) Business Enterprises
(c) Government
(d) All of the above
Answer: B

Question. Which of these is a source of savings for Government?
(a) Tax and Fees Collections
(b) Profits of PSUs
(c) Both (a) and (b)
Answer: C

Question. If there is an increase in income levels, the propensity to consume —
(a) Reduce s
(b) Increases
(c) Remains constant
(d) Becomes zero
Answer: A

Question. Real Capital Formation requires —
(a) An entrepreneurial class which is prepared to bear the risk of business
(b) Economic and industrial policies in which Investment is given initiative
(c) An inducement to invest, e.g. prospective rate of profit
(d) All of the above
Answer: D

Question. Inducement to Invest is influenced by —
(a) Prospective Rate of Profit
(b) Rate of Interest
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Prospective Rate of Profit is also called —
(a) Rate of Interest on Bank Deposits
(b) Marginal Efficiency of Capital
(c) Marginal Utility of Capital Employed
(d) Marginal Revenue
Answer: B

Question. As a Factor of Production, Capital is mobile across —
(a) Places / Countries
(b) Uses / Purposes
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Entrepreneur is also called as —
(a) Organiser
(b) Manager
(c) Risk—Taker
(d) All of the above
Answer: D

Question. Entrepreneurship is a wider term than organization and management of a business. This statement is —
(a) True
(b) False
(c) Partially True
(d) None of the above
Answer: A

Question. Entrepreneur —
(a) Is the catalyst in the process of using the factors of production.
(b) Gives direction to the usage of other factors of production
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Higher the level of income, Higher is the level of Savings. This statement is —
(a) True
(b) False
(c) Partially True
(d) None of the above
Answer: A

Question. Enterpreneur holds the final responsibility of the business. This statement is —
(a) True
(b) False
(c) Partially True
(d) None of the above
Answer: A

Question. In Production Activity, one of the ways of creating Utility is —
(a) Form Utility
(b) Marginal Utility
(c) Total Utility
(d) All of the above
Answer: A

Question. The functions of an Entrepreneur include —
(a) Initiating a business enterprise and
(b) Risk—bearing or uncertainty— bearing
(c) Introducing Innovations on a continuous basis
(d) All of the above
Answer: D

Question. Innovation theory of entrepreneur is propounded by—
(a) Prof knight
(b) Schumpeter
(c) Max weber
(d) Peter Ducker
Answer: B

Question. Which of the following constitute Innovation?
(a) Introduction of a new or improved product
(b) Utilisation of new or improved source of Raw Material
(c) Introduction of new or improved production methods / machinery
(d) All of the above
Answer: D

Question. Which of the following constitute Innovation?
(a) Opening—up new or improved markets
(b) Utilisation of new or improved source of Raw Material
(c) Introduction of a new or improved product
(d) All of the above
Answer: D

Question. Organic Objectives of Enterprises —
(a) Survival
(b) Growth and Expansion
(c) Both (a) and (b)
(d) Either (a) or (b)
Answer: C

Question. Profit Making is a —
(a) Organic Objective
(b) Social Objective
(c) Economic Objective
(d) None of the above
Answer: C

Question. A country has greater ability to save than a in income levels, the .... country. 
(a) Rich, Poor
(b) Poor, Rich
(c) Good, Bad
(d) Nothing can be said
Answer: A

Question. Entrepreneurship gets its reward (i.e. Profit), only after all other factors of production have been rewarded. This statement is —
(a) True
(b) False
(c) Partially True
(d) None of the above
Answer: A

Question. The difference between Economist's Profit and Accountant's Profit is
(a) Consideration of Direct Cost
(b) Consideration of depreciation
(c) Consideration of Opportunity Cost
(d) There is no difference
Answer: C

Question. 1f there is an increase in income levels, the propensity to save —
(a) Reduces,
(b) Increases
(c) Remains constant
(d) Becomes zero
Answer: B

Question.To ensure that the Enterprise's output does not cause any type of pollution — air, water or noise, is a
(a) Social Objective
(b) Human Objective
(c) National Objective
(d) Economic Objective
Answer: A

Question. Which of these play a role in mobilisation of savings in an economy?
(a) Banks
(b) Financial Institutions
(c) Capital Market
(d) All of the above
Answer: D

Question. The reward / incentive / remuneration for Entrepreneurship is a ................ amount.
(a) Fixed
(b) Var iable
(c) Semi—Variable
(d) Irrelevant
Answer: B

Question. ........ save by reducingtheir present consumption.
(a) Individuals or Households
(b) Business Enterprises
(c) Government
(d) All of the above
Answer: A

INTRODUCTORY MICROECONOMICS

UNIT-I

PRODUCTION POSSIBILITIES CURVE

The production possibilities (PP) curve is a graphical medium of highlighting the central problem of 'what to produce'. To decide what to produce and in what quantities, it is first necessary to know what is obtainable. The PP curve shows the options that are obtainable, or simply the production possibilities.

What is obtainable is based on the following assumptions:

1. The resources available are fixed.

2. The technology remains unchanged.

3. The resources are fully employed.

4. The resources are efficiently employed.

5. The resources are not equally efficient in production of all products. Thus if resources are transferred from production of one good to another, the cost increases. In other words marginal opportunity cost increases.

The last assumption needs explanation because it determines the shape of the PP curve. If this assumption changes, the shape changes.

Efficiency in production means productivity i.e. output per unit of an input. Let the input be worker. Suppose an economy produces only two goods X and Y. Suppose a worker is employed in production of X because he is best suited for it. The economy decides to reduce production of X and increase that of Y. The worker is transferred to Y. He is not that efficient in production of Y as he was in X. His productivity in Y will be low, and so cost of production high.

The implication is clear. If the resources are transferred from one use to another, the less and less efficient resources will be transferred leading to rise in the marginal opportunity cost which is technically termed as marginal rate of transformation (MRT).

What is MRT?

Marginal Rate of Transformation (MRT)

To simplify, let us assume that only two goods are produced in an economy. Let these two goods be guns and butter, the famous example given by Samuelson. The guns symbolize defense goods and butter, the civilian goods. The example, therefore, symbolizes the problem of choice between civilian goods and war goods. In fact it is a problem of choice before all the countries of the world.

Suppose if all the resources are engaged in the production of guns, there will be a maximum amount of guns that can be produced per year. Let it be 15 units (one unit may be taken as equal to 1000, or one lakh and so on). At the other extreme suppose all the resources are employed in production of butter only. Let the maximum amount of butter that can be produced is 5 units. These are the two extreme possibilities. In between there are others if the resources are partly used for the production of guns and partly for production of butter. Given the extremes and the in-between possibilities, a schedule can be prepared. It can be called a production possibilities schedule.

Please refer to the link below for - CBSE Class 12 Economics-Production Possibilities Curve