2nd PUC Economics Question Bank Chapter 1 Introduction to Micro Economics

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Karnataka 2nd PUC Economics Question Bank Chapter 1 Introduction to Micro Economics

2nd PUC Economics Introduction to Micro Economics One Mark Questions and Answers

1. Choose The Correct Answer.

Question 1.
The scarce resources of an economy have
(a) Competing usages
(b) Single usages
(c) Unlimited usages
(d) None of the above
Answer:
(a) Competing usages

Question 2.
Which of the following is an example of micro economic study?
(a) National Income
(b) Consumer behaviour
(c) Unemployment
(d) Foreign trade
Answer:
(b) Consumer behaviour

Question 3.
Which of the following is a macro economic variable?
(a) Individual demand
(b) Aggregate demand
(c) Firms output
(d) Price of a good
Answer:
(b) Aggregate demand

Question 4.
Central problems of an economy includes.
(a) What to produce
(b) How to produce
(c) For whom to produce
(d) All of the above
Answer:
(d) All of the above

Question 5.
Traditionally, the subject matter of economics has been studied under the following broad branches.
(a) Micro & Macro Economics
(b) Positive & Normative
(c) Deductive&Inductive
(d) None of the above
Answers:
(a) Micro & Macro Economics

Question 6.
PPC curve is also known as:
(a) Demand curve
(b) Supply Curve
(c) Transformation curve
(d) Indifference curve
Answer:
(c) Transformation curve

Question 7.
Scarcity is a situation in which:
(a) People are poor
(b) People are rich
(c) Wants exceed the resources available to satisfy them.
(d) Something is wasted
Answer:
(c) Wants exceed the resources available to satisfy them.

Question 8.
Which of the following is not a subject matter of microeconomics?
(a) Pricing theory
(b) Monetary policy
(c) Market structure
(d) Consumer behavior
Answer:
(b) Monetary policy

Question 9.
The various combinations of good that can be produced in an economy when it uses its available resources and technology efficiently are depicted by:
(a) Demand curve
(b) Production Possibility Curve
(c) Supply curve
(d) Product curve
Answer:
(b) Production Possibility Curve

Question 10.
Labour Intensive technology is chosen in a_______economy.
(a) Developed economy
(b) Devoloping economy
(c) Underdeveloped economy
(d) Lobour surplus economy
Answer:
(d) Lobour surplus economy

Question 11.
Capital intensive technology is chosen in a ______economy.
(a) Underdeveloped economy
(b) Developed economy
(c) Capital surplus economy
(d) Labour surplus economy
Answer:
(c) Capital surplus economy

Question 12.
Which of the following is not one of the three central problems that the study of economics is supposed to answer?
(a) Who produces what?
(b) Who consumes what?
(c) When are goods produced?
(d) How are goods produced?
Answer:
(c) When are goods produced?

Question 13.
Which of the following is a reason for the concave shape of PPF?
(a) Diminishing MOC
(b) Constant MOC
(c) Increasing MOC
(d) All of the above
Answer:
(c) Increasing MOC

Question 14.
Raja: My sugarcane harvest this year is poor.
Krishna: Don’t worry. Price increases will compensate for fall in quantity supplied.
Vijay: Climate affects crop yields. Some years bad, others are good.
Mayur: The government ought to guarantee that our income will not fall.
In this conversation, the normative statement is made by
(a) Raja
(b) Krishna
(c) Vijay
(d) Mayur
Answer:
(d) Mayur

Question 15.
With an advancement in technology, the PPC will
(a) Shift rightwards
(b) Shift leftwards
(c) Rotate on X-axis
(d) Rotate on Y-axis
Answer:
(a) Shift rightwards

Question 16.
What to produce means
(a) Types of goods to be produced
(b) Quantity of goods to be produced
(c) both (a) and (b)
(d) neither (a) nor (b)
Answer:
(c) both (a) and (b)

Question 17.
Identify the correct statement
(a) In deductive method, logic proceeds from particular to the general
(b) Micro and Macro-Economics are interdependent.
(c) In a capitalist economy, the economic problems are solved by Planning Commission
(d) Higher the prices, lower is the quantity demanded of a product is a normative statement.
Answer:
(b) Micro and Macro-Economics are interdependent.

Question 18.
Economic goods are considered scarce resources because they
(a) cannot be increased in quantity
(b) do not exist in adequate quantity to satisfy social requirements
(c) are of primary importance in satisfying social requirements
(d) are limited to man made goods.
Answer:
(b) do not exist in adequate quantity to satisfy social requirements

Question 19.
From the national point of view which of the following indicates micro approach?
(a) Per capita income of India.
(b) Underemployment in agricultural sector
(c) Lock out in TELCO
(d) Total savings in India.
Answer:
(c) Lock out in TELCO

Question 20.
In a free market economy the allocation or resources is determined by
(a) votes taken by consumers
(b) a central planning authority
(c) consumer preference
(d) the level of profits of firms
Answer:
(c) consumer preference

Question 21.
Which of the following bundles of goods cannot be produced with the resources the economy currently has?
(a) a
(b) b
(c) c
(d) d
Answer:
(d) d

Question 22.
An economy achieves “productive efficiency” when
(a) resources are employed in their most highly valued uses.
(b) the best resources are employed
(c) the total number of goods produced is greatest.
(d) goods and services are produced at least cost and no resources are wasted.
Answer:
(d) goods and services are produced at least cost and no resources are wasted.

Question 23.
Which point on the PPF shows a “productively efficient” level of output?
(a) A
(b) B
(c) C
(d) All of the above
Answer:
(d) All of the above

Question 24.
Which of the following clearly represents a movement toward greater productive efficiency
(a) A movement from point A to point B
(b) A movement from point C to point D
(c) A movement from point F to point C
(d) A movement from point E to point B
Answer:
(c) A movement from point F to point C

Question 25.
Which of the following illustrates a decrease in unemployment using the PPF?
(a) A movement down along the PPF
(b) A rightward shift of the PPF
(c) A movement from a point on the PPF to a point inside the PPF.
(d) A movement from a point inside the PPF to a point on the PPF.
Answer:
(d) A movement from a point inside the PPF to a point on the PPF.

Question 26.
Choice is created by the
(a) abundance of resources
(b) urgency of needs
(c) non-availability of resources
(d) scarcity of resources
Answer:
(d) scarcity of resources

Question 27.
The branch of economic theory that deals with the problem of allocation of resources is
(a) micro-economic theory
(b) macro-economic theory
(c) econometrics.
(d) none of the above.
Answer:
(a) micro-economic theory

Question 28.
Which of the following is related to microeconomics?
(a) inflation in the economy
(b) problem of unemployment
(c) National income
(d) Income from the railways
Answer:
(d) Income from the railways

Question 29.
In free market economy, the allocation of resources is determined by
(a) votes taken by consumers
(b) a central planning authority
(c) consumer preference
(d) the level of profits of firms
Answer:
(c) consumer preference

Question 30.
Central economic problems are the problems of a_________ .
(a) market economy
(b) socialist economy
(c) mixed economy
(d) All of these
Answer:
(d) All of these

Question 31.
Best shape of PPC reflects
(a) diminishing opportunity cost
(b) constant opportunity cost
(c) increasing opportunity cost
(d) None of these
Answer:
(a) diminishing opportunity cost

Question 32.
According to economic growth, production possibility curve will show
(a) a downward shift
(b) an inward shift
(c) an outward shift
(d) No effect
Answer:
(c) an outward shift

II. Fill in the Blanks

1. Scarcity of resources gives raise to ________
Answer:
The Problem of Choice

2. In a centrally planned economy all important decisions are made by ______
Answer:
The Government

3. In reality, all economies are ________
Answers:
Mixed Economies

1. Economic problem arise due to _______of resources and alternative uses of means.
Answers:
Scarcity

2. _______cost is the cost of next best alternative foregone.
Answers:
Opportunity

3. When Marginal rate of transformation is constant the PPC would be_______line.
Answers:
Straight

4. Moving from one point on PPC to another point of PPC is known as _______
Answers:
Tradeoff

5. The usual shape of PPC is_______towards the origin.
Answers:
Concave

6. Cotton textile industry in an economy is an example of_______study.
Answers:
Microeconomic

7. _______is a schedule that shows various combinations of two goods which can be produced by an economy with given resources and technology.
Answers:
Production Possibility Schedule

8. A mechanism through which the scarce resources are prioritized and organized for the production of goods and services with the intervention of government is called as _______.
Answers:
Economy.

9. An economy where the economic decisions are taken through the market mechanism i. e., demand and supply is called as_______.
Answers:
Market economy.

10. A _______ economy is one where there is co-existence of both public and private sector enterprises.
Answers:
Mixed

11. The study of‘what is’ and ‘what was’ under the given circumstances is called_______economics
Answers:
Positive

12. The study of ‘what should be’ or ‘what ought to be’ is called _______economics
Answers:
Normative

13. Study of consumer behavior is an example of_______
Answers:
Microeconomics studies

14. Study of price determination in the market is an example of _______
Answers:
Microeconomics studies

15. The basic functions of an economy are _______, _______, _______, and _______.
Answers:
Production, distribution, consumption and exchange.

III. Match the following

Question 1.

A	B
1. Market economy	a. Government
2. Service of a Teacher	b. Private
3. Centrally planned economy	c. Skill
4. Positive economics	d. Evaluate the Mechanism
5. Normative economics	e. Functioning of Mechanism

Answers:
1. (b) Private
2. (c) Skill
3. (a) Government
4. (e) Functioning of Mechanism
5. (d) Evaluate the Mechanism

Question 2.

A	B
1. PPF	a. ‘What is’
2. Opportunity Cost	b. USA
3. Centrally Planned Economy	c. What ought to be
4. Market Economy	d. PPC
5. Positive Economics	e. Next best alternative
6. Normative Economics	f. China

Answer:
1. (d) PPC
2. (e) Next best Alternative
3. (f) China
4. (b) USA
5. (a) ‘What is’
6. (c) What ought to be

IV. Answer the following questions in a sentence/word.

Question 1.
Why does the problem of choice arise?
Answer:
Every society has to face scarcity of resources and it is the scarcity of resources that gives rise to the problem of choice.

Question 2.
What is market economy?
Answer:
An economy where the economic decisions are taken through the market mechanism i.e., demand and supply is called as market economy.

Question 3.
What do you mean by centrally planned economy?
Answer:
In a centrally planned economy, the government or the central authority plans all the important activities in the economy. All important decisions regarding production, exchange and consumption of goods and services are made by the government.

Question 4.
Give the meaning of micro economics.
Answer:
Micro economics studies the behaviour of individual economic agents in the markets for different goods and services and try to figure out how prices and quantities of goods and services are determined through the interaction of individuals in these markets.

Question 5.
What do you mean by positive economics?
Answer:
The study of ‘what is’ and ‘what was’ under the given circumstances is called positive economics.

Question 6.
What is normative economics?
Answer:
The study of ‘what should be’ or ‘what ought to be’ is called normative economics.

2nd PUC Economics Introduction to Micro Economics Two Marks Questions and Answers

V. Answer the following Questions in 4 Sentences.

Question 1.
Mention the central problems of an economy.
Answer:
The central problems of an economy are

• What is produced and in what quantities?
• How are these goods produced?
• For whom are these goods produced?

Question 2.
Distinguish between Micro and Macro economics.
Answer:

Basis	Micro Economics	Macro Economics
Meaning	Microeconomics is that part of economics which studies the behaviors of individual units of an economy	Macroeconomics studies the behavior of aggregates of the economy as a whole.
Tools	Demand and supply are main tools	Aggregate demand and aggregate supply are main tools.
Objective	Objective It aims to determine price of commodity or factors of production.	It aims to determine income and employment level of the economy.
Theory	Related theories are (a) Theory of price (b) Theory of consumer behavior	Related theories are (a) Theory of consumption and investment [b] Theory related to employment.

Question 3.
Distinguish between positive and normative economics.
Answer:
Positive Economics

1. Here we study ‘what is’ and ‘what was’ under given circumstances.
2. Here we study how different mechanism function.

Normative Economics

1. Here we study ‘what ought to be’ or ‘what should be done and what is good and bad’ under given circumstances.
2. Here we try to understand whether these mechanisms are desirable or not.

Question 4.
What do you mean by production posibility set?
Answer:
The collection of all possible combinations of the goods and services that can be produced from a given amount of resources and a given stock of technological knowledge is called the production possibility set.

Question 5.
What is opportunity cost?
Answer:
Opportunity cost can be defined as, “the cost of next best alternative scarcified in order to produce that good”.

Question 6.
What is production possibility frontier?
Answer:
It is a curve which depicts all possible combinations of two goods which an economy can produce with the available resources and given technology.

2nd PUC Economics Introduction to Micro Economics Four Marks Questions and Answers

VI. Answer the following Questions in 12 Sentences.

Question 1.
Briefly explain the production possibility frontier.
Answer:
It is a curve which depicts all possible combinations of two goods which an economy can produce with the available resources and given technology.

Properties of PPF:

1. PPC is downward sloping curve because in a full employment economy, the production of one good can be increased only by sacrificing the other good.
2. PPC is concave to the origin because of increasing marginal opportunity cost.
3. PPC can shift leftwards or rightwards.

Question 2.
Briefly explain the central problems of an economy.
Answer:
Introduction:
Human wants are unlimited and the resources to satisfy these wants are very limited. Hence there is a gap between our wants and resources and hence the problem of choice arises and it is called as economic problem.

There are three fundamental problems in every economy:

1. What to produce (problem of choice).
2. How to produce (problem of technology).
3. For whom to produce (problem of distribution).

What to produce (problem of choice): As resources are scarce, an economy cannot produce everything in infinite quantity, say food or clothing, more food or little clothing or vice versa. What shall be produced today and tomorrow? All these questions arise because of limited resources. Thus the problem of choice arises. The economy must choose the commodity, its quantity and quality.

How to produce (problem of technology): This problem is relating to choice of technology. There are two techniques of production:

• Labour intensive technique – More labour is used in production than capital.
• Capital intensive technique – More capital is used in production than labour.

The choice between these two techniques arises because the former technique generates employment opportunities and the latter rises efficiency. Thus the society has to choose the right technique of production between these two techniques depending on resources and requirement.

For whom to produce (problem of distribution): For whom shall goods be produced that is who is to enjoy and get the benefit of the goods and services produced? Human wants and resources vary from region to region. The individuals may belong to economically weaker section or rich. Therefore, the problem of distribution arises.

Question 3.
Write a short note on a centrally planned economy.
Answer:

• In a centrally planned economy the government or the central authority plans all the important activities in the economy All important decisions regarding production, exchange and consumption of goods and services are made by the government.
• The central authority may try to achieve a particular allocation of resources and a consequent distribution of the final consumption of goods and services which is thought to be desirable for society as a whole.
• The government concentrates on the well-being and prosperity of the economy as a whole, e.g. education or health service, is not produced in adequate amount by the individuals on their own, the government might try to induce the individuals to produce adequate amount of such a good or service.
• Whenever it is necessary the government may intervene in few situations and try to achieve an equitable distribution of goods and services.

Question 4.
Write a short note on market economy.
Answer:

• In a market economy, all economic activities are organized through the market. A Market is an institution which organizes the free interaction of individuals pursuing their respective economic activities.
• In a market system, all goods and services come with a price at which the exchanges take place. Prices serve as indicator to producer and consumers.
• In a market system, the central problems regarding how much and what to produce are solved through the coordination of economic activities brought about by the price signals.
• This type of economy exists in the USA, Japan, Australia and other countries.

Question 5.
State the assumptions of Production Possibility analysis.
Answer:
The four key assumptions underlying production possibilities are:

1. The resources available are fixed.
2. The technology remains constant.
3. The resources are fully and efficiently employed.
4. The resources are not equally efficient in the production of one good to another. The cost of production increases (i.e., Marginal Opportunity Cost increases).

Question 6.
Giving reason comment on the shape of PPC based on the following schedule.

Answer:


The PPC is downward sloping concave because of increasing marginal opportunity cost.

Question 7.
Explain the uses of micro economics
Answer:
Microeconomics plays a significant role in economic analysis. It has both theoretical and practical validity. In the words of Keynes, “Micro economics is a necessary part of one’s apparatus of thought”.

1. Allocation of resources: Microeconomics studies the behaviour of an individual consumer or firm in a particular situation. Resources are scarce and therefore it needs to be allocated properly. Microeconomics helps in proper allocation and optimum utilization of these resources to produce various goods and services.

2. To understand the working of the economy: Microeconomics helps in understanding the working of free enterprise economy. It gives an idea about how major economic decisions are taken in a market economy.

3. Price determination: Microeconomics also helps to determine the relative prices of various goods and services based on demand and supply.

4. Optimum utilization of resources: Microeconomics explains the conditions of efficiency in both production and consumption and departure from the optimum level. With this the resources can be optimally utilized.

5. Economic policy: Microeconomics helps in formulating various economic policies and economic plans to promote all round economic development.

6. International trade: Microeconomics is useful to explain gains from international trade, balance of payments and determination of exchange rate.

7. Market structure: Microeconomics not only analyses economic conditions but also studies the social needs under different market conditions like monopoly, duopoly, oligopoly etc.

8. Analysis of tax policy: Microeconomics helps the government in fixing the rate and type of tax as well as the amount of tax to be charged to the buyer and the seller. It is also helpful to understand the consequences of taxation.