Tag: economic reconstruction

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Questions Related to economic reconstruction

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Multiple Choice Question:

Output of Good-X decreases by $500$ units and output of Good - Y increases by $500$ units, when some resources are shifted from the production of X to the production of Y. The marginal opportunity cost is __________.

  1. $0.2$

  2. $0.75$

  3. $0.8$

  4. $1.0$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Output of Good-X decreases by 500 units and output of Good-Y increases by 500 units, when some resources are shifted from the production of X to the production of Y. The marginal opportunity cost is 1.0. 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. The formula to calculate marginal opportunity cost is sacrifice/gains. Therefore, the marginal opportunity cost is 500/500= 1.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
In a free market economy, decision relating to 'for whom to produce' enhances the gap between the rich and the poor.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a free economy, the producers will produce goods for those who can afford to pay high price. Poorer sections of the society are often, thus, ignored. As a result, the gap between the rich and the poor enhances.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
Marginal opportunity cost falls as resources are shifted from Good - $1$ to Good - $2$.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The slope of production possibility curve is the marginal opportunity cost, which refers to the additional sacrifice that an economy needs to make when it shifts resources and technology from production of one commodity to the other. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost.  

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
Central problems of an economy are found only in those economies which are not governed or regulated by the government.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The central economic problems rise for the basic fact that the resources in the economy is scarce whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy and regulations/intervention of the government can do little about central economic problems.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
Problem of resource allocation is automatically solved in a free market economy.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a free market economy, prices of commodities in the market are affected by the forces of demand and supply. This generates open competition in the market which leads to optimum allocation and utilization of resources in the economy without any planning or intervention of any authority.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
PPC shows an increasing slope.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The slope of production possibility curve shows the marginal opportunity cost which refers to the additional sacrifice that an economy must make when they shift resources and technology from production of one commodity to the other. Since resources are use specific, therefore, each time when one more unit of a commodity is produced a larger quantity of the other commodity is required to be sacrificed. This results in increasing marginal opportunity cost., which is denoted by the slope of the PPC.

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
Choice between 'production for the poor' and 'production for the rich' refers to the problem of 'what to produce'.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Choice between 'production for the poor' and 'production for the rich' refers to the problem of 'for whom to produce' where the product is produced keeping in mind the the end users of the product whereas 'what to produce' relates with the production of goods that are in high demand in the economy irrespective of poor or rich class. 
Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

Economic problem arises when ____________.

  1. wants are unlimited

  2. resources are unlimited

  3. alternative uses of resources

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The central economic problems rise for the basic fact that the resources in the economy is scarce with many alternative uses whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy. 

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

The problem of resource allocation would not arise if resources had no alternatives uses.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Economics deals in the problems of how resources are allocated in the production of various goods and services in the economy for the satisfaction of human wants because these resources are scarce and have alternative uses whereas human wants are unlimited

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
When output of Good - $1$ increases from $100$ units to $110$ units and output of Good - $2$ decreases from $400$ units to $350$ units, marginal opportunity cost = $50$ units.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Marginal opportunity cost $= \dfrac{\triangle \,\text{Loss of output of Good - 2}}{\triangle\, \text{Gain of output of Good - 1}} = \left[\dfrac{50}{10} = 5\right]$

Marginal opportunity cost $=5$.