Question
Does production take place only on the PP curve?
✓
Answer
The given statement may or may not be correct. If the given resources are fully and efficiently used in an economy, the production takes place on the PP curve. But if the resources in the economy are underutilised or inefficiently utilised or both, the production takes place inside the PP curve. The given figure illustrates the point.
On point F, and for that matter on any point on the production possibility curve OAB, the resources are fully and efficiently employed. On point U, below the PP curve or any other point, but below the PP curve, the resources are either underutilised or inefficiently utilised or both. Any point below the PP curve thus highlights the problem of unemployment and inefficiency in the economy.
On point F, and for that matter on any point on the production possibility curve OAB, the resources are fully and efficiently employed. On point U, below the PP curve or any other point, but below the PP curve, the resources are either underutilised or inefficiently utilised or both. Any point below the PP curve thus highlights the problem of unemployment and inefficiency in the economy.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.
Explore more
Similar questions
A firm supplies $10$ units of a good at a price of $5$ per unit. Price Elasticity of Supply is $1.25$. What quantity will the firm supply at a price of $7$ per unit.
→Price Elasticity of Demand of a good is $(-) 3$. If the price rises from ? $10$ per unit to ? $12$ per unit, what is the percentage change in demand?
→Discuss briefly the various sources of data.
When price of a good falls from ₹ 20 to ₹ 10 per unit, producer reduces supply from 100 units to 50 units. Calculate price elasticity of supply.
In the given diagram, $OP$ is the market determined price and $OP_1 $is the price fixed by the government.
→
- Identify if the diagram represents, price ceiling or price flooring.
- Discuss the likely behaviour of the market in the given condition.
PED of X is known to be thrice that of Y. If price of the commodity X increases by 20% and price of the commodity Y decreases by 40%, calculate percentage change in demand in both the cases.
Explain the implication of the following: The feature of ‘no close substitutes' under monopoly.
Explain how a fall in the price of related goods affect the demand for a given good. Give examples.
OR
A consumer consumes good X. Explain the effect of fall in the price of related goods on the demand of X. Use diagrams.
OR
A consumer consumes good X. Explain the effect of fall in the price of related goods on the demand of X. Use diagrams.
'What is likely to be the impact of Make in India' appeal to the foreign investors by the Prime Minister of India, on the production possibilities frontiers of India? Explain.
Complete the following table:
| Output (Q) (units) | Total Variable Cost (TVC) (₹) | Average Variable Cost (AVC) (₹) | Marginal Cost (MC) (₹) |
| 1 | 10 | __ | 0 |
| 2 | __ | 8 | 6 |
| 3 | 27 | __ | __ |
| 4 | __ | 10 | 13 |