Class 12 Economics
CBQ Practice
Competency Based Questions · 6 chapters · 12 CBQ sets
Introduction — Scarcity and Choice
2 setsRead the passage
What does Point B (inside the PPF) indicate about the economy?
1MWhat does Point C (outside the PPF) represent?
1MIf the opportunity cost of 1 tonne of wheat is 5 units of textiles, what is the opportunity cost of producing 10 more tonnes of wheat?
1MExplain the concept of opportunity cost using the PPF example. What happens to the PPF if new technology improves wheat production only?
1MThe problem of scarcity exists in both developed and developing countries.
Scarcity is the fundamental economic problem arising because human wants are unlimited but the resources available to satisfy them are limited — this applies regardless of a country's level of development.
Theory of Consumer Behaviour
2 setsRead the passage
Consumer equilibrium occurs at point E because:
1MWhat does it mean if MRS > Pf/Pc at a particular consumption bundle?
1MPoint G (12 kg food, 6 units clothing) lies outside Priya's budget because:
1MExplain why indifference curves cannot intersect each other.
1MThe law of diminishing marginal utility states that as a consumer consumes more units of a good, the total utility eventually falls.
As more units of a good are consumed, the additional satisfaction (marginal utility) from each successive unit decreases, though total utility continues to rise as long as marginal utility is positive.
Production, Costs and Revenue
2 setsRead the passage
What is the Total Cost (TC) when the firm produces 30 bats?
1MAverage Fixed Cost (AFC) when the firm produces 50 bats is:
1MAt 50 units, Total Revenue = ₹25,000 and TC = ₹18,500. The firm is making:
1MExplain the relationship between Marginal Cost (MC) and Average Variable Cost (AVC) curves.
1MIn the long run, all costs are variable.
In the long run, a firm can adjust all its inputs — including capital, plant size, and technology — so there are no fixed factors of production and hence no fixed costs.
Market Structures
2 setsRead the passage
Why is a farmer in a perfectly competitive market called a 'price-taker'?
1MWhen does a perfectly competitive firm shut down in the short run?
1MDuring a drought, supply falls. At the original equilibrium price of ₹20/kg, the market will experience:
1MDistinguish between 'normal profit' and 'supernormal profit' in the context of perfect competition.
1MA monopolist always earns supernormal profits in the long run.
A monopolist has barriers to entry that prevent new firms from entering the market and competing away profits, but demand and cost conditions still determine whether profits are positive.
National Income Accounting
2 setsRead the passage
GDP at Market Price (using expenditure method) is:
1MNet Domestic Product at Market Price (NDP at MP) is:
1MTransfer payments like pensions and scholarships are excluded from National Income because:
1MCalculate National Income (NNP at FC) for Country X using the data given.
1MAn increase in the Cash Reserve Ratio (CRR) reduces the money supply in the economy.
Higher CRR means banks must keep more reserves with the RBI, reducing funds available for lending, which decreases the money multiplier effect and contracts the total money supply.
Government Budget and Balance of Payments
2 setsRead the passage
Revenue Deficit = Revenue Expenditure − Revenue Receipts. What is the Revenue Deficit?
1MFiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings). What is the Fiscal Deficit?
1MPrimary Deficit = Fiscal Deficit − Interest Payments. What is the Primary Deficit?
1MWhy is capital expenditure on infrastructure considered more productive than revenue expenditure on subsidies?
1MA depreciation of the domestic currency always benefits the entire economy.
Currency depreciation makes exports cheaper for foreigners (boosting export revenue) but also makes imports more expensive, raising costs for import-dependent industries and increasing inflation.