COMPETENCY BASED QUESTIONS
TOPIC: PRODUCTION POSSIBILITY CURVE (PPC)
Q1. A PPC is convex to the origin if the marginal rate of transformation is:
a) Increasing c) Constant
b) Decreasing d) None of these
Q2. A PPC would shift towards the right when there is __________
a) Growth of resources and improvement in technology
b) Underutilisation of resources
c) Improvement in technology
d) Efficient utilisation of resources
Q3. If there is unemployment in the economy, we would be producing:
a) Inside the PPC c) Outside the PPC
b) On the PPC d) Can’t say
Q4. If the marginal rate of transformation is constant, the shape of PPC would be:
a) Convex to the origin c) Concave to the origin
b) A straight-line curve d) Any of the these
Q5. Which of the following would lead to a leftward shift of the PPC?
a) Growth of resources
b) Efficient utilisation of resources
c) Inefficient utilisation of resources
d) Decrease in resources
Q6. Which of the following statements is false?
a) A point above the PPC represents an increase in the available resources
b) Due to unemployment, an economy tends to operate at a point inside the PPC
c) A given PPC shows what an economy can potentially produce and not what it actually
produces
d) A PPC is downward sloping because in order to increase the production of one good,
the production of other good has to be reduced
Q7. Which of the following is not an assumption of PPC?
c) The production possibility curve is a graphical technique to represent the choice
between the production of two goods only
d) A PPC deals with limited resources
e) A PPC deals with a constant technology of production
f) As per PPC theory, resources in an economy should not be efficiently utilised
Q8. Assume that a PPC for missiles and mobile phones is drawn such that it is a straight line.
It means that:
a) Same units of mobile phones are sacrificed to produce additional units of missiles
b) Lesser and lesser units of mobile phones are sacrificed to produce additional units of
missiles
c) More and more units of mobile phones are sacrificed to produce additional units of
missiles
Q9. Which of the following will not lead to a shift of the PPC?
a) Upgradation of technology
b) Exploration of new oil resources
c) Massive job crisis
d) Destruction of resources
Q10. Which of the following illustrates a decrease in unemployment using PPC?
a) A movement down along the PPC
b) A rightward shift of the PPC
c) A movement from a point on the PPC to a point inside the PPC
d) A movement from a point inside the PPC to a point on the PPC
Q11. A routine PPC is concave to the origin which means that:
a) Resources are equally efficient in the production of both of the goods (i.e. to produce
an additional unit of good X, same units of good Y have to be sacrificed)
b) Resources are not equally efficient in the production of both the goods (i.e. to produce
an additional unit of good X, more and more units of good Y have to be sacrificed)
c) Both (a) and (b)
d) None of the above
Q12. The likely impact of large-scale outflow of foreign capital on the PPC would be:
a) PPC would shift towards the left
b) PPC would shift towards the right and then left
c) The economy will move to a point inside the PPC
d) The economy will move to a point outside the PPC
Q13. What would be the impact of “Swachh Bharat Abhiyan” and “Make in India” campaign
on India’s PPC?
a) PPC would shift towards the right
b) PPC would shift towards the left and then right
c) The economy will move to a point outside the PPC
d) The economy will move to a point inside the PPC
Q14. Define PPC. “Large number of technical training institutions have been started by the
Government”. How would such an initiative by the Government impact India’s PPC
and economic growth?