Important Questions for Class 12th Economics(Hots) PDF

Important Questions for Class 12th Economics(Hots) PDF

1 Marks Question Answers

Ques.1 Do you think that the study of pricing of software of the firm is the part of the micro-economic study? Important Questions for Class 12th Economics(Hots) PDF

Ans. 1 Yes, it is a part of the micro-economic study, as it is concerned with the study of an individual firm.

Ques.2 Is the study of the cotton industry, a micro-economic study or a macroeconomic study?

Ans.2 It is a micro-economic study because it is a case of an individual industry.

Ques.3 Why is the study of the problem of unemployment in India considered as a macroeconomic study? 

Ans.3 The problem of unemployment in India is an economic issue at the level of an economy as a whole, hence it is considered as a macroeconomic study.

Ques. 4 State the fundamental problem of an economy that resulted in the emergence of economics which have alternative uses.

Ans. 4 It is the problem of scarcity of resources in relation to human needs/desires.

Ques. 5 You are living in a country whose economy is underdeveloped. In this context, why there is a need for efficient utilization of resources?

Ans. 5 Developmental needs are more in the underdeveloped economy and these can be fulfilled with the help of limited resources. Thus, there is a need for efficient and effective utilization of resources.

Ques. 6 China is also an emerging economy like India, however, it keeps on inventing new and further advanced technologies. Do you agree that if they keep on doing so, one day will come, when there will be no central problems in China?

Ans. 6 Constant improvement in technology by China would surely expand their production capacity. However, this cannot solve the central problems ever, as we know that human wants are unlimited and recurring.

Ques. 7 Unemployment is reduced due to the measures were taken by the government. State its economic value in the context of production possibilities frontier.

Ans. 7 When the government takes measures to reduce the unemployment, it enables the economy to utilize its existing resources in an optimum manner and moves from inside the PPC to points on the PPC. Hence, economic value is reflected in terms of increased output and income.

Ques. 8 The government has started promoting foreign capital. What is its economic value in the context of production possibilities frontier?

Ans. 8 As government has started promoting foreign capital, the resources that were sitting idle, currently get the job and also the economy functions at its most capable and moves from within the PPC to points on the PPC. value is mirrored in terms of augmented output and financial gain.

Ques. 9 An economy produces two goods, wheat, and rice. Due to inflation and lack of resources, the production of wheat reduces. In this case, what will be the shape of the Production Possibility Curve? Draw the PPC.

Ans. 9 If due to inflation and lack of resources, the production of wheat decreases, keeping the production rice as constant, then this will cause the PPC to rotate inwards on the X-axis (the axis depicting the production of wheat).

Ques. 10 If Production Possibility Curve shifts to the right, should it be parallel to the old one?

Ans. 10 No, because the slope of PPC indicates Marginal Opportunity Cost, which may be different at different levels of output.

Ques. 11 ‘Opportunity cost is not an actual cost’. Do you agree?

Ans. 11 Yes, I agree that opportunity cost is not an actual cost. In fact, it is the cost of next best alternative available but not actual opted for in the decision-making process.

Ques. 12 In case, an entrepreneur’s capital stock shrinks over time, what will be its impact on PPC?

Ans. 12 If an entrepreneur’s capital stock shrinks over time, this will reduce the production capacity. Accordingly, PPC shifts to the left.

3/4 Marks Question Answers

Ques.1 To what extent you would agree with the statement that any ‘scarce good commands high price’? Important Questions for Class 12th Economics(Hots) PDF

Ans.1 This is very correct to say that only scarce goods are high in price. This can be supported by the water, diamond paradox. Though water is very useful for all living being. However, it is very low priced as it is available in plenty. On the other hand, diamond which is not so useful is still very high in price due to its relative scarcity.

Ques. 2 Water resources are limited in our country, how can we economize the water resources, so that it would not become a future problem for us? Give any two suggestions.

Ans. 2 The two suggestions which can be used for economizing the water resources are:

  1. Rainwater should be preserved for future usage.
  2. Wastage of water should be avoided so that economical use of water can be made.

Ques. 3 In recent time, it has been observed that petrol and diesel price have fallen several times due to changing market conditions. Do you think this will solve the problem of ‘what to produce’ in developing countries like India?

Ans. 3 It is good news for a country like India that the prices of petrol and diesel have fallen, however, it can never solve the central problem of ‘what to produce’ to its full extent, as human wants are unlimited in comparison to the supply of natural products like petrol or diesel.

Ques. 4 Do you think that, if India imports new and advanced technology from USA (a developed country), it would solve the central problem of ‘how to produce’?

Ans. 4 India being a developing country usually imports new and advanced technology from the USA, which would definitely expand India’s production capacity. However, it cannot solve the central problem of ‘how to produce’ to its full extent, due to unlimited and recurring nature of wants and technology cannot be imported in unlimited quantities.

Ques. 5 Which technology of production would you prefer in rural India, a ‘labor intensive’ one, which would curtail the problems of unemployment to a certain extent or a ‘capital intensive’ one, which is very highly productive in nature?

Ans. 5 India, being a labor intensive country has a good stock of human resources and is also faced with the problem of high rate of unemployment. So, it would be preferable to opt for a technology which is labor intensive in nature, as a highly capital intensive technique of production would require less labor, causing the problem of unemployment to deteriorate.

Ques. 6 Why is Production Possibility Curve called opportunity cost curve?

Ans. 6 PPC is also called opportunity cost curve because the slope of the curve at each and every point measures the opportunity cost of one commodity in terms of an alternative commodity given up. The rate of this sacrifice is called the Marginal Opportunity Cost of the expanding good.

Ques. 7 Gulf countries have acquired more capital goods by selling oil to various countries. What would be its impact on PPC?

Ans. 7 It is an example of increase or growth of resources. It results in a rightward shift of PPC as it shows a higher level of the output of both the given goods.

Ques. 8 A farmer is producing two commodities wheat and opium, in order to get more profit. If he starts producing more opium that wheat, what will be its impact on PPC and what values are being neglected by the farmer?

Ans. 8 Grain like wheat is required more to satisfy the needs & wants of people. If a farmer starts producing more opium than wheat, then it will simply move upward on the same PPC from point C to D, (if we take wheat on X-axis and opium on Y-axis) as is depicted in the graph. Farmer is not a person of ethics, he is neglecting social values.

Ques. 9 What is the slope of PPC? What does it show?

Ans. 9 PPC is concave to the origin. Its slope is known as Marginal Rate of Transformation. It shows an increasing slope, i.e. more and more of the commodity Y is to be sacrificed for every additional unit of commodity X. In other words, the cost of producing additional X tends to increase in terms of the loss of Y.

Ques. 10 Suppose an economy, only two goods are being produced, i.e. guns and wheat. While due to recession in the neighbor country, there is a huge migration of people in the home country. What will the impact of such a movement on the transformation curve of the home country?

Ans. 10 In the home country only two goods are produced i.e. guns (which is capital intensive) and wheat (which is labor intensive) and there is a huge migration of labor from outside to home country, which would lead to shifting in transformation curve of home country rightwards, due to increase in resources. However, it will not be a parallel shift rather new transformation curve will be more biased towards the production of wheat (being a labor-intensive good).

Ques. 11 What will be the impact of improvement in technology of good X while deterioration of technology of good Y simultaneously, on the PPC of the home country?

Ans. 11 Improvement or deterioration of technology would cause a rotation in the PPC, however, in the above case, there is an improvement in the technology of good X which will result in outward rotation, on the other hand, due to simultaneous deterioration in the technology of good Y, the inward rotation will occur.

Ques. 12 These days several multinational companies are coming to India for operation. Which income group do they target the most? Also, what will be its impact on India’s PPC, if they bring new technology with them?

Ans. 12 MNCs are driven by the profit motive, hence their production decisions are highly motivated to target high-income group in India, who can afford to buy goods produced by MNCs at a higher price. As the MNCs are bringing new technology to India, it would shift India’s PPC rightwards/outwards, indicating expansion of production capacity of all the goods.

Unsolved Questions

Ques. 1 Name the components of microeconomics and macroeconomics.

Ques. 2 What factors lead to a rightward shift of the Production Possibility Curve?

Ques. 3 What would be the impact on PPC, in case if there is a loss of humans and materials due to natural calamities?

Ques. 4 ‘Only planned economies face the central problems’. Do you agree? Give reasons in support of your answer.

Important Questions for Class 12th Economics(Hots) PDF

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