Central Problems of an Economy MCQ — Class 11

Economic problem

Economic problem: the problem of allocating scarce resources with alternative uses among competing wants

What to produce

What to produce: the central problem of choosing which goods and services to produce and in what quantities

How to produce

How to produce: the central problem of choosing the technique or factor combination used in production

For whom to produce

For whom to produce: the central problem concerning distribution of output and purchasing power among people

Production possibility set

Production possibility set: all output combinations that can be produced with given resources and technology

Production Possibility Frontier

Production Possibility Frontier: the boundary showing maximum attainable combinations of two goods with given resources, technology and efficient use

Point inside PPC

Point inside PPC: an attainable combination showing underutilisation or inefficient utilisation of resources

Point outside PPC

Point outside PPC: a combination unattainable with current resources and technology

Opportunity cost

Opportunity cost: the value of the next best alternative forgone when a choice is made

Outward shift of PPC

Outward shift of PPC: an increase in productive capacity caused by more or better resources or improved technology

1. Which concept best matches this situation? A government decides how to use limited land, labour and capital.

1. What to produce
2. Economic problem
3. For whom to produce
4. Point inside PPC

2. Which concept best matches this situation? An economy chooses between more consumer goods and more capital goods.

1. How to produce
2. Production possibility set
3. What to produce
4. Point outside PPC

3. Which concept best matches this situation? A factory chooses between labour-intensive and capital-intensive methods.

1. For whom to produce
2. Production Possibility Frontier
3. Opportunity cost
4. How to produce