Tag: economics

Tomatoes and tomato puree(sauce) are example of substitutes.

The slope of production possibility curve represents the marginal opportunity cost, which refers to the additional sacrifice that would have to be made when resources and technology are shifted from production of one commodity to the other owing to limited resources. This opportunity cost between two goods is increasing which is denoted through the negative slope of PPC.

World Trade Organisation is an apex organisation that regulates trade between all the countries under some rules and regulations set up by the organisation with negotiation with all the countries under trade. They facilitates smooth flow of goods and services between various countries which are in trade agreement. 

External economies of scale take place when an entire business grows larger and firms benefit from subordinate long-run average costs. External economies of scale can also be referred to as positive external benefits of industrial development.

External economies of scale describe comparable conditions, only for complete manufacturing instead of a company. For example, if the city creates an enhanced transportation network to service a particular industry, then all companies in that industry will benefit from the new transport network, and experience decrease production costs.

The correct option is C.

Inflation which is often expressed in percentage is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time continuously which indicates a decrease in the purchasing power of a nation's currency.

Resources refers to the resources which are limited in quantity and have alternative uses in production of various commodities. So the problem of these scarce resources is reflected in the aggregate supply of the economy which is also limited owing to limited source of inputs. 

When some resources are shifted from Use-1 to Use-2( given technology and resources) the marginal rate of transformation increases, as per the concept of Production possibility curve.Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost or marginal rate of transformation.  

Opportunity cost is an avoidable cost- this is a false statement, since opportunity cost cannot be avoided.In an economy, every goods and services has an alternative available. Opportunity cost of production of a commodity refers to the cost which the producer has to sacrifice in terms of the next best alternative which could be produced out of that cost in order to produce every unit of the given commodity. Therefore, to produce every commodity producer has to sacrifice some units of the other commodity. 

In a market economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads distribution of goods and services according to the purchasing power of an individual where the consumers have freedom of choice between how much they will spend and how much they will save. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Since price mechanism operates without government intervention, there is need for developed legal system in the economy so that there are less chances of fraudulent practices in the market.