CBSE Class 12 Economics HOTs All Chapters. Higher Order Thinking Skills (HOTS) download and print
3 -4 MARKS QUESTIONS
Q.1 Why is a production possibilities curve concave? Explain.
Ans. The production possibility curve being concave means that MRT increases as we move downward along the curve. MRT increases because it is assumed that no resource is equally efficient in production of all goods. As resources are transferred from one good to another, less & less efficient resources have to be employed. This raises cost and raises MRT.
Q. 2 Explain properties of a production possibilities curve.
Ans. There are two properties of a production possibilities curve.
1 Downward sloping : It is because as more quantity of one good is produced some quantity of the other good must be sacrificed.
2. Concave to the origin : It is because the marginal rate of transformation increases as more of one good is produced.
Q. 3 Explain the problem of ‘what to produce’.
Ans. An economy can produce different possible combinations of goods & services with given reasources. The problem is that, out of these different combinations, which combination is produced. If production of one good increases then less resources will be available for other goods.
Q. 4 What is ‘Merginal Rate of transformation’? Explain with the help of an example.
Ans. MRT is the rate at which the units of one good have to be sacrificed to produce one more unit of the other good in a two goods economy. Suppose an economy produces only two goods X and Y. Further suppose that by employing these resources fully and officiently, the economy produces 1X + 10Y. If the economy decides to produce 2X, it has to cut down production of Y by 2 units. Then 2Y is the opportunity cost of producing 1X. Then 2Y:1X is the MRT.
Q. 5 Explain the problem ‘How to produce’.
Ans. Broadly, there are two techniques of production.
(i) Labour intensive Technique : Under this technique, production depends more on the use of labour.
(ii) Capital Intensive Technique : Under this technique, production depends more on the use of machines (called capital) efficient technique of production is that which uses minimum possible inputs for a given amount of output. So that, cost per unit of output is minimised.
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