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CA Foundation · Business Economics · Nature and Scope of Business Economics

A government decides to set up a fully automated steel plant using very little labour, even though India has a large pool of unemployed workers. Which basic economic problem is mainly involved in this decision?

The decision mainly involves the problem of how to produce. Choosing an automated, capital-intensive plant over labour-intensive methods is a choice of production technique, even though it affects employment. It is not primarily about what goods to produce or who receives them.

  1. AChoice of technique of production, that is, how to produceCorrect
  2. BChoice of goods, that is, what to produce
  3. CDistribution of output, that is, for whom to produce
  4. DMaintaining full employment of resources only

Explanation

The decision concerns capital-intensive versus labour-intensive methods, which is the 'how to produce' problem. Though employment is affected, the choice being made is the technique of production. Choice of goods would concern steel versus other products, which is not the focus here.

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