Production Possibility Curve

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  • Q1

    What are the features of production possibility curve?

    Marks:2
    Answer:

    The features of production possibility curve are as follows:
    1. It slopes downward to the right: the PPC curve is downward sloping because we have to forgo some quantity of one product to have more quantity of other product.

    2. It is concave to the origin: The PPC is curve is concave to origin due to operation of the law of increasing marginal opportunity cost.

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  • Q2

    What are the reasons for rightward shift of the production possibility curve?

    Marks:1
    Answer:

    The reasons for the rightward shift of the production possibility curve are technological progress and increase in the supply of factors of production.

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  • Q3

    Define production possibility curve.

    Marks:1
    Answer:

    It is the graphical representation of alternative combinations of the amount of two goods or services which an economy can produce by transferring resources from one good or service to the other.

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  • Q4

    What are the three central problems faced by an economy?

    Marks:1
    Answer:

    The three central problems faced by an economy are as follows:

    • What to produce?
    • What to produce?
    • How to Produce?

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  • Q5

    What do you understand by the term Central Problems?

    Marks:1
    Answer:

    The central problems of an economy deal with the allocation of available resources in the production and distribution of commodities.

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